These seven stocks are in trouble. While the broader market struggles with ongoing interest rate hikes, constrained cash and more, these seven stocks suffer more than most. But all hope isn’t lost — if the companies can mount buyouts.
Oftentimes, larger firms hunt for smaller firms with a semi-viable product or existing operational model for a buyout. Buyouts, also known as mergers and acquisitions (M&A), can benefit large and small firms alike. Bigger players capture existing assets and customers more cheaply. The smaller company benefits from existing for a bit longer under a new umbrella.
Bigger firms are hunting for bargains today, and these stocks are in trouble — a perfect combination for M&A in today’s economic climate.
Lordstown Motors (RIDEQ)
Lordstown Motors (OTCMKTS:RIDEQ) is in the midst of a buyout today, as this electric vehicle (EV) stock fell mightily from its once-high position. In June, the EV manufacturer sued Foxconn, claiming the Taiwanese company fell through on past investment agreements.
To that end, Lordstown recently initiated buyout proceedings with private equity firm LAS Capital. LAS Capital, majority owned by Lordstown’s founder and former CEO, “signed a $10 million purchase agreement for assets related to the ‘design, production and sale of electric light-duty vehicles’ in the commercial fleet market.”
The company became a penny stock in May, and this deal might be enough to save this struggling company. Current bagholders might see some capital returned to their pockets because the company is currently debt-free. The penny stock trades at less than book value, meaning shares are priced below existing assets. There may be an opportunity here for investors willing to do some due diligence, but this stock’s days are likely over — despite the M&A.
Buyout Opportunity: WeWork (WE)
WeWork (NYSE:WE) is a once-promising company capitalizing on the emerging remote work trend. Still, financial mismanagement and commercial real estate concerns pushed this stock into penny stock territory. Despite this, WeWork’s core value proposition is compelling. The company offers remote workers and teams an opportunity to leverage office space when needed to help avoid the distraction inherent in working from home.
Today, a whole team of institutional investors is exploring opportunities to save WeWork through M&A. Led by BlackRock (NYSE:BLK), institutional investors are exploring restructuring options or maybe bankruptcy. What ends up happening is anyone’s guess, but WeWork has a viable model that could be lucrative under the right management team. A buyout might be just enough to save the company, especially with heavy hitters like BlackRock leading the charge.
Image Protect (IMTL)
Image Protect (OTCMKTS:IMTL) is another penny stock I think is in trouble — but a prime buyout opportunity. IMTL came of age during the crypto and NFT craze and offers legal solutions to protect artists’ intellectual property. This week, IMTL also announced its entry into the reputation management and online review industry.
IMTL did an M&A of its own by buying Review Control Reputation Management, which helps its clients improve online reviews. The subscription-based service is IMTL’s entry into the multi-billion dollar online reputation industry. Despite the news, the penny stock fell substantially after announcing the buyout. Priced well below a penny, there isn’t much more room to fall. Still, the company’s existing service and ongoing development of “an impactful NFT marketplace” may have a place in the markets. At the same time, IMTL’s market cap makes it primed for a buyout of its own by larger firms.
Buyout Opportunity: Bark (BARK)
Bark (NYSE:BARK), creator of the innovative BarkBox service, might be ready to play with the big dogs if it can find a buyer for M&A. A hot stock during the pandemic when everyone spoiled their furry friends, Bark’s sales are consistently slipping and putting the company at serious risk. Still, the company’s high-quality dog toys and other products put it in a unique position when considering its existing strategic partnerships.
Bark has long partnered with retail giant Target (NYSE:TGT). While Target has trouble of its own, including slipping sales and theft, Bark could easily leverage Target’s brand loyalty and market penetration to mount a comeback through a buyout. Alternatively, existing subscription-based pet service companies like Chewy (NYSE:CHWY) might see Bark as just the thing to add to its extensive product portfolio.
In any case, Bark is on the ropes. This stock in trouble might be salvageable if it can negotiate a buyout quickly.
Virgin Galactic (SPCE)
Richard Branson’s Virgin Galactic (NYSE:SPCE) fell from its stratospheric valuation in the past months, making it another stock prime for a buyout. Nevertheless, the capital-intensive company offers a real (if pricy) product with widespread application. Commercial hypersonic flight has long been a dream. The company offers tourism-based flights to those who can afford it — the hyper-wealthy. Still, SPCE could leverage existing tech to expand into daily commercial use if it plays its cards right.
Unfortunately, hypersonic flight development is extremely expensive. To that end, SPCE’s best bet is to hope for a buyout or M&A with a major aerospace firm. Some ballpark the space business as worth $1 trillion in the future. SPCE’s existing assets provide a perfect entry for a merger with a larger, more established and well-managed company.
Buyout Opportunity: SmileDirectClub (SDCCQ)
SmileDirectClub (OTCMKTS:SDCCQ) investors hit a major snag recently as the firm recently filed for bankruptcy. The stock trades deeply in penny stock territory now but all hope isn’t lost if the firm can angle for a buyout.
Despite the bankruptcy, analysts project SmileDirectClub’s earnings to grow by as much as 20%. That section of the overall dental industry is only expected to grow by 12.8% over the same period, making SDC a compelling option for M&A. Like Bark, SDC enjoys a slew of strategic partnerships. Those big-name companies can leverage SDC’s trouble into a buyout to save the stock. SDC’s oral health products are in Walmart (NYSE:WMT), for example.
That big-box chain could identify SDC’s revenue stream as a perfect buyout opportunity to keep products moving into consumer hands. Likewise, with a bigger brother like Walmart steering the ship, SDC could turn around its tight financial position and mount a major comeback. On its own, though, this stock is in trouble, and a buyout is its only hope.
Peloton (PTON)
In 2022, rumors swirled that Peloton (NASDAQ:PTON) was facing a buyout from major tech companies like Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN). Nothing panned out, and the stock is in trouble today. While it isn’t facing imminent bankruptcy or delisting, the stock still trades at a fraction of its past value. But it doesn’t have to be this difficult for Peloton.
Specifically, the company could be a new entry for Apple to penetrate the at-home fitness market further. There’s likely substantial overlap between Apple and Peloton consumers, considering both prefer a boutique experience. Peloton prefers targeting higher-end consumers interested in a luxury fitness experience. The company refuses to break that model and offer low-budget products — an admirable stance considering its slipping market share.
If Peloton can bring a compelling offer to the table, it may offer something Apple can leverage massively. Specifically, one analyst points to “a significant demographic overlap between Apple and Peloton — [the analyst] estimates the majority of U.S. iPhone users have an annual income of over $80,000 — and therefore expects opportunities to build its audience of connected fitness users.”
On the date of publication, Jeremy Flint did not hold (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.