(Bloomberg) — Peloton Interactive Inc. soared in premarket trading after reports that it’s exploring takeover options, a move that could test investors holding short positions in the fitness company.
Most Read from Bloomberg
The New York-based company is working with an adviser after an earlier plunge in Peloton’s shares made it a takeover target, according to people familiar with the matter, who asked not to be identified because discussions are private. The takeover interest is exploratory and may not lead to a transaction, they said.
The stock rose 27% in early premarket trading in New York and could see more gains at the New York open due to high short interest. A 12% short position on its free float could mean short sellers would scramble to cover their positions, fueling shares further higher.
“You don’t want to be short over a weekend when ‘Merger Monday’ is the day of the week when deals are announced,” said Jim Dixon, senior equity sales trader at Mirabaud Securities. “The rally in Peloton from M&A chatter was fueled a tad more from the outstanding short positions on the indoor exercise bike maker.”
Peloton’s stock has fallen more than 80% from the high a year ago as the gradual easing of pandemic restrictions fueled concern that growth would slow. It’s currently valued at just over $8 billion, based on Friday’s official market close of $24.60 a share — below its September 2019 initial public offering price of $29 a share.
Activist investor Blackwells Capital LLC last month issued a letter demanding the company fire co-founder and Chief Executive Officer John Foley and pursue a sale. Blackwells said in the letter that potential buyers could include Apple Inc., Walt Disney Co., and Nike.
Amazon.com Inc. has been speaking to advisers about a potential deal, the Wall Street Journal reported on Friday. Nike Inc. is also considering a separate bid for Peloton, the Financial Times said. Neither Nike nor Amazon have held direct talks with Peloton, the FT reported.
Analyst views on the likelihood of a deal are mixed. John Blackledge at Cowan said any deal is unlikely given the company’s potential and vision, and Amazon isn’t an ideal fit as its focus is on mass-market selling while Peloton has a premium positioning. Wedbush’s Dan Ives said a bid from Apple would make strategic sense given the tech giant’s focus on health initiatives.
(Updates with trader comment in fourth paragraph, analyst comment in last paragraph.)
Most Read from Bloomberg Businessweek
©2022 Bloomberg L.P.
