Why iRobot Stock Short-Circuited Today
What happened
Shares of iRobot (NASDAQ: IRBT) had fallen by 8.4% as of 11:45 a.m. ET in Thursday trading, after Reuters reported that the European Union has launched a "full-scale" antitrust investigation of Amazon's (NASDAQ: AMZN) plan to acquire the maker of Roomba vacuum-cleaning robots.
So what
Investors were presumably caught off guard by the announcement, which came just a week after the United Kingdom's Competition and Markets Authority gave its assent to the deal. Now, with the European Commission taking the opposite course, iRobot (and Amazon) investors have months of new uncertainty to look forward to.
Reuters notes that the E.U.'s antitrust regulator will conduct a "preliminary review" of the deal through July 6, which will be followed by a "four-month investigation." So in total, we're probably looking at five more months, minimum, before Amazon might be allowed to proceed with its purchase of iRobot.
Now what
Even if at the end of this process, the E.U. agrees with the U.K. that Amazon's purchase of iRobot does not raise competition concerns, investors still aren't 100% out of the woods. U.S. regulators are also looking into the deal, and may have concerns of their own. That being said, if everyone eventually signs off, then iRobot investors can expect to be paid $61 per share in cash -- which works out to a tidy 34% gain from Thursday's prices.
On the other hand, if the deal is ultimately called off, chances are that iRobot shares will revert toward the $50 level they were trading at just prior to Amazon's buyout offer -- or they could wind up even lower, near their current price of about $45, leaving investors worse off than they were before Amazon expressed its interest.
No wonder investors are bummed.
10 stocks we like better than iRobot
When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and iRobot wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of June 12, 2023
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon.com and iRobot. The Motley Fool has a disclosure policy.
