Peloton shares soared 22 per cent in premarket trading today after weekend reports of takeover interest from Amazon and Nike.
Amazon is exploring an offer for Peloton, a source told Reuters on Friday. The Financial Times and the BBC also reported sportswear company Nike was weighing a bid for Peloton, which touched new records last year as its bikes sold like hot cakes during the pandemic when people were stuck at home.
However, the exercise bike maker failed to sustain momentum and it lost a majority of its share gains made during the pandemic as people started to go back to the office and to gyms.
Crucially, the potential offers come at a time Peloton’s shares are trading near two-year lows, down over 84 per cent in the past year.
Peloton’s chief executive John Foley has faced calls to quit with activist investor group Blackwells Capital accusing him of agreeing deals which set high fixed costs for the business, holding onto excessive inventory and misleading investors about the need for a capital raise. Foley also came under fire for hiring his wife as a key executive and committing the company to a 20-year-lease in a 300,000 square foot New York office space.
Russ Mould, investment director at AJ Bell, commented that whilst the initial hype around Peloton may have added too much to its share price during the lockdown, he said: “Now that froth has cleared there could be some substance to talk of bid interest.”
“Peloton may be unprofitable, but it is still a strong brand in an emerging world where exercise and tech are likely to be ever more closely linked and it also has a potentially attractive subscription-based model. You could see it as a logical fit for its two rumoured bidders Nike and Amazon.”
“Nike is looking to move beyond footwear and sports attire and Amazon continues to spread its tentacles into more areas of people’s lives.
However, Mould added: “Peloton’s founder John Foley, who has attracted the ire of activist investors on governance grounds, might be an obstacle to any deal given the veto power he enjoys under the firm’s dual share class structure.
Others have also questioned whether Peleton would be an ideal fit for Amazon as the e-commerce giant typically sells mass market products and services, whereas Peloton’s products are positioned as premium.