Peloton shares jumped 30%; here is why

Peloton Interactive Inc. (NASDAQ: PTON) is up 30% after the list of its potential acquisition suitors continues to increase. According to sources familiar with the matter, Amazon.com Inc. (NASDAQ: AMZN) might be interested in acquiring the stationery-bike manufacturer, which has been under pressure for an activist investor to consider a sale.

Amazon considering Peloton acquisition

According to the sources, Amazon has been talking to advisors about a possible deal. However, t here’s no assurance that the e-commerce behemoth will proceed with an offer or whether Peloton, which is engaging its consultants, will be interested.

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Also, other possible suitors are hovering, according to these sources, but no agreement is near, and one may not be reached at all. However, given Peloton’s market worth of roughly $8 billion—down drastically from its high of around $50 billion a year ago—it might be substantial if there is a deal.

During the pandemic, Peloton was a darling for customers working out from home who ordered its exercise equipment, but demand has slowed down with the lifting of COVID-19 restrictions.

On Friday, the stock closed at $24.60 below its IPO price of $29. However, shares jumped almost 30% after hours following Wall Street Journal reports that Amazon and other suitors were interested in acquiring the company.

Interestingly, despite the challenges Peloton is experiencing, a possible acquisition will give Amazon or any other buyer access to millions of Peloton users and data, a massive boost for the growing health and fitness tech market.

Amazon has the resources to make the acquisition

Currently, ties between the company and Amazon’s operations like the fleet and logistics arm might help Peloton address supply-chain challenges. Also, the company’s subscription feature could be included in Amazon Prime. In addition, in recent years, Amazon has been focusing on connected health following the Halo Health and Wellness tracker launch.

If Amazon decides to acquire Peloton, it definitely has resources. Last week the company posted a quarterly profit of almost $15 billion.

Activist investor wants Peloton sold

Blackwell Capital LLC has been urging Peloton’s Board to fire its CEO and consider a sale. The activist investor argues that Peloton is currently weaker than before the pandemic and will be better off by merging with a big company.

Although Peloton is yet to respond directly, its CEO Mr. Foley indicated that they are reviewing their workforce and reorganizing production to enhance profitability as they adapt to seasonal demand.