Peloton Could Be Acquired by Amazon or Nike

Peloton hype has turned to desperation as its market cap plummets.

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The Wall Street Journal reported e-commerce giant Amazon has approached the company about a potential deal. Other potential suitors are circling, including Nike and others.

Peloton creates subscription based revenue along with its over-priced exercise hardware in a competitive field. For a company like Amazon interested in the smart home or Nike, this could be a huge feather in their cap.

Peloton is not yet running a formal sales process, but there is real interest in the company. As its stock has plummeted the acquisition cost of its business also returns back to Earth. The pandemic stock beneficiary hit some major snags in its business model and in the actual demand for its products (which is badly forecasted).

Its current market cap is $8 Billion and its stock could still decline. However on the news of a potential Amazon acquisition bid, the stock was up 26% in after-hours trading on Friday February 4th, 2022.

Peloton executives and insiders sold nearly $500 million worth of their stock before its big decline, according to SEC filings. This is a very bad sign for the future of the company. I think Peloton is the kind of company that could make exercise in the Metaverse a really fun thing.

Peloton’s huge spike in market cap was rather temporary. Much of the selling started when shares surged past $80 in the fall of 2020. The sales gained momentum in 2021 as the stock held above $100. In addition to the WSJ report on Amazon’s interest, the Financial Times separately?reported?that sneaker maker Nike is evaluating a bid. This suggests that Peloton could be acquired in 2022 or 2023.

Peloton has struggled in recent months with lockdown being over, negative press and cheaper models coming to the market, along with major problems in gaging demand vs. supply incorrectly. This sounds like poor leadership. However I think the product is good, even for a more high-end brand like Apple. This could be tethered with Apple Fitness+ and Apple’s smart watch offering, the AppleWatch.

Last month, the activist investor Blackwells Capital called on Peloton’s board to remove the company’s chief executive, John Foley, and put the company up for sale. I think the most likely companies to acquire it are in order:

• Amazon
• Apple
• Nike

Amazon is exploring an offer for Peloton and is speaking with advisers about whether and how to proceed, a source said. Peloton has not yet decided whether it will explore a sale, according to the source. I actually think Peloton’s problems are insurmountable and it will indeed be acquired.

Its market cap has gone from $52 Billion to $8 Billion with increased competition, bad PR and a return to a normal post-pandemic environment in the spring of 2022, when people will crave to return to in-person fitness gyms and classes.

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