M&A Timing and Selling: Why it Matters
Peloton Interactive, which was founded in 2012 and is a brand well-known for its exercise bikes, first went public in August 2019, offering at $25.24 per share (on September 27, 2019). At the time, the company had $915 million in total revenue for the year. Unfortunately, however, Peloton did not get the response it was hoping for. Investors barely took notice, or they actively ignored the new stock. For a business that was so admired, what happened? Were the opening prices too aggressive? Was the product not something that would withstand the long term? Or was it just not the right time?
In early September 2019, before the organization went public with its IPO, Peloton’s Chief Financial Officer, Jill Woodworth, explained in an interview that the macro market had started to deteriorate. However, she still felt comfortable moving forward with the decision. What if Woodsworth gave it a few more months? Would the market and the receptibility have improved or worsened? Of course, there is no crystal ball and certainly, there was no way to predict COVID-19 back in September 2019.
If COVID-19 had been a factor at the time, Peloton may have had a different entrance into the market, instead of $25 per share, it may have opened much higher (and today it is trading at approximately $120 per share – as of October 27, 2020). With gyms staying closed or open at a limited capacity, there is a higher demand for home gym equipment, which does not take up much space and can offer a connection to other participants. Peloton has become the answer. The timing now of Peloton is perfect.
While no one can predict a pandemic or any other world event, every company must be keenly aware of world markets and how its services or products intersect. Timing the sale of your company to be optimized hinges on this timing. As the old Kenny Rogers song lyric goes “[y]ou’ve got to know when to hold ’em; [k]now when to fold ’em; [k]now when to walk away . . .”
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Michael N. Mercurio is a leading attorney in the field of mergers and acquisitions (M&A). He serves as outside general counsel in buy-side and sell-side M&A, as well as in all business law and real estate law matters. As a strategic partner to firm clients, Mr. Mercurio regularly counsels entrepreneurial individuals and assorted entities on the many challenges, issues, and opportunities companies face throughout the business lifecycle—from start-up to eventual exit.
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