Greg Martin, Founder and Managing Director at Rainmaker Securities, discusses the benefits of Big Tech bidding for Peloton and highlights the ongoing headwinds impacting the exercise equipment maker.

Cheddar Movers 

Amazon, Nike Reportedly Looking to Buy Peloton

here to talk more Greg martin, founder and managing director at Rainmaker Securities Greg good to have you back on the show, um, wondering how amazon could potentially benefit from an acquisition here with peloton, I want to go through the list, but start with amazon. Well, thank you for having me. Good to see you again. Asia, you know, at Rainmaker, we followed Peloton for a long time, having facilitated a large number of secondary transaction while they were still private. And I kind of view peloton is that jewel in the jewelry store, um, that you would like to have, but it was a little too expensive. And what's interesting is because it's come down in price so much despite amazing growth of the last two years. All of a sudden I think people in their m and a departments are thinking, hmm, I can now purchase this thing at a relative bargain and I think, you know, none of these companies may have, you know, probably felt they needed to own it, but now it could turn into a defensive situation. So let's start with amazon, as you mentioned, amazon was, was rumored on friday to, you know, be looking at it and that's why the stock I think has surged up. You know, if your amazon, you are always looking for ways to connect to your consumers in the home and of course they're doing it through amazon prime, they're doing it through amazon dot com, They're doing it through Alexa that they bought a ring. Um and this is something where 30 people spend 30-60 minutes a day exercising And if you think about some of Amazon's initiatives, they are getting into health and connected health in particular. And so Peloton offers, you know, nearly three million subscribers who spend 30-60 minutes a day using their product. It's obviously collecting a lot of data on people and it's a very affluent demographic. So I can see why it would be interesting amazon as they think about how to grow the amazon prime flywheel. This is yet another subscription opportunity to grow their annual recurring revenue. So it makes a ton of sense for amazon. Yeah, a lot of really interesting points there, wondering what you think the biggest hurdle would be for amazon going forward. I know a big one that has gained attention, antitrust concerns. Yes, certainly in amazon's going through it firsthand right now as they have tried to buy MGM and it's taking a long time, it's getting held up with the FTC. And you know, there's a general sense in Congress and in the government that these big tech companies have become too big, they're too much of a part of our life as they start buying more and more independent companies, they'll have more and more control and there's a potential that uh, you could have some monopolistic type powers happening. And so I think that even if they tried to buy it, it would get a lot of scrutiny just like their deal with MGM is. So I think that could be an impediment to a transaction happening here and you know, something that, you know, the government and congress will have to watch very closely and that could be what derails, anything happening with a company like amazon Greg. We also have to of course talk about Nike here, a major suitor for peloton moving forward and it sounds like something we've seen in the past, right. One of their biggest competitors during this time would be lulu lemon and lululemon bought Mirror could a Nike peloton acquisition look similar, It would mirror that acquisition, no doubt. Um, you know, I, I actually thought lulu lemon would have been in the bidding for peloton once upon a time they ended up buying mirror, Peloton just became too expensive for them. Um, so it absolutely does make sense for them as they look to expand their, their health offering, their connected health offerings and I do think that they need to be to look for more subscription businesses, you know, to, to really get towards, you know, this more affluent customer whose health focus who wants connectivity and frankly it's a tech play for them as they consider, you know, the future of growth opportunities for them. So I think it would be something that Nike and you know, they've been room, they were rumored to be buying peloton before they went public. So as I said, I think this is a particular, you know, jewelry customer that's been in the jewelry store for a long time and has had their eye on peloton and I expect that they will be part of the bidding and now it's a price that, you know, isn't such a significant proportion of their market cap. So, uh, and I think it probably has a better chance of clearing the FTC as well. Um whereas I think that someone like amazon or apple would have much harder time getting through, you know, the government, you know, rigor in getting a deal like this done. So Nike could be the one that ends up with this jewel. Yeah. And using that jewelry store metaphor. I love it so much lulu, lemon is a little bit richer this time around in the store. Do you think there could be a bidding war between a Nike and a lulu. Um or do you not foresee something like that? You know, it's this, this one is so fascinating because there's so many potential bidders and there's some real deep pocketed bidders. We haven't talked about Disney, we haven't even talked about Microsoft, even google who bought fit foot Fitbit, who could be in the fray here. Um you know, as it relates to sort of to health companies like Nike and lululemon. I definitely think lululemon is looking at it now they're having to integrate and ingest mirror and they probably thought mirror was going to be there, you know, connected health, you know competitor to peloton and maybe they think they can go it alone. Um, so it's, there's no doubt that every m and a guy at all of these companies is sharpening their pencils this week because there could be a battle royale to see who gets peloton really good insight as usual. Greg martin, founder and managing director at Rainmaker Securities.