Healthy Competition

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What's going on?

Reports emerged over the weekend that Amazon and Nike both want to buy fitness company Peloton, and they’re already squeezing into leggings for their head-to-head.

What does this mean?

Peloton was in the best shape of its life in the depths of the pandemic, with its valuation hitting a nearly $50 billion high as recently as a year ago. But post-lockdown freedom has taken its toll on the company, whose stock has now fallen over 80% since those heady days. That puts Peloton at a valuation of just under $8 billion.

Cue Amazon and Nike, two companies with an eye for a bargain. The Everything Store might see Peloton as a good fit as it continues to expand into the health and wellness space, not to mention allow it to market its products to Peloton’s almost 3 million subscribers. Nike, meanwhile, might simply want to build out its already extensive fitness community – and kit out Peloton’s instructors head to toe in swooshes, of course.

Why should I care?

For markets: Undo! Undo!
Peloton’s stock jumped over 30% after the reports surfaced, and a “short squeeze” could push it higher still. See, 12% of all Peloton’s stock is currently being “shorted”, meaning some investors are selling its shares to others in hopes of buying them back at a lower price later on. In other words, they’re betting Peloton’s share price will fall. But now that their bet’s being proved wrong, those “short sellers” might buy the shares back before their losses climb even higher – a move that’ll push Peloton’s stock up even more.

The bigger picture: Is Apple next?
Some analysts think Apple – which has a pile of cash burning a hole in its pocket – might want to bolster its own fitness subscription business by buying Peloton too. But there’s one flaw with that theory: Peloton’s weighty exercise equipment doesn’t fit with Apple’s notorious strategy of urging customers to upgrade their gadgets year in, year out.

Originally posted as part of the Finimize daily email.

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