When Consensual Hallucination Fades: iRobot Shares -91% from Peak Meme-Stock Mania
SEC, did you look at the story two months ago that Amazon “is set to win unconditional EU antitrust approval,” which caused iRobot to spike 39% in one day?
By Wolf Richter for WOLF STREET.
Amazon’s acquisition of iRobot for a ridiculous price of $61 a share – announced in August 2022 and now likely getting nixed by EU competition regulators, whew, Amazon sighs – was a deal made in heck from get-go.
iRobot had become a meme stock around 2017 with huge spikes and plunges that were driven to the next level during the meme-stock mania in 2020 and early 2021. On January 29, 2021, iRobot shares [IRBT] spiked to an intraday high of $197, giving it a market cap of $5.5 billion. Consensual hallucination is what we have come to call this phenomenon. Oh dear, to the moon!
But after that spike came that infamous February when this kind of stuff started coming apart, and iRobot shares went to heck. By now, they have collapsed by 91%, including a 45% kathoomph over the past five days, to $17.26. The company is now a shining hero in our pantheon of Imploded Stocks.
The misbegotten takeover announcement came just months before Amazon made another announcement, this time of mass layoffs, including at its hardware division that makes consumer devices such as the Echo, Alexa, Fire, and Kindle. The iRobot consumer gadgets would have fit right in there. And Amazon had a change of mind about its strategy with these gadgets.
Alas, after the takeover announcement, iRobot got busy disclosing stuff that had gone wrong at the company, including declining revenues and big losses.
In July 2023, Amazon lowered the purchase price to $51.75, which caused iRobot’s shares to plunge. Doubts about completing the deal started spreading, and the shares kept sliding.
On November 8, 2023, iRobot reported a huge loss and awful revenues. By November 20, shares were trading in the $29 range, amid doubts that the EU competition watchdog would approve the deal. And then, a miracle happened – actually no miracle, just the normal market manipulation that we’ve become so familiar with.
Someone seems to have planted a story, published as an “exclusive” by Reuters – citing “three people familiar with the matter,” as these things usually are – that Amazon “is set to win unconditional EU antitrust approval” for its acquisition of iRobot, which was then repeated by CNBC and others, and shares spiked 39% that day, from $29.83 at the close on November 22 to $41.48 the next day. SEC, did you take a gander at this?
So then on January 18, Thursday evening, the Wall Street Journal reported that competition officials at the European Commission “met Thursday with representatives from Amazon to discuss the deal, one of those people said. Amazon was told during the meeting that the deal was likely to be rejected, the person said. Amazon declined to comment.”
“The plan to reject the deal would still need formal approval from the commission’s 27 top political leaders before a final decision can be issued. Historically, that process is unlikely to overrule a recommendation from the bloc’s competition commissioner, Margrethe Vestager. The commission has a Feb. 14 deadline for its final decision.”
Shares instantly tanked 40% in afterhours trading on Thursday. On Friday, they closed at $17.26, down 27% for the day and down 91% since the meme-stock peak in January 2021.
Lots of people lost lots of money on iRobot. But some people made lots of money, including from the fake approval announcement if they got out in time. There are no victims here. It’s all part of the fun, part of the consensual hallucination that people had been so eager to participate in. And there is still plenty of consensual hallucination going around, people are still eager to be part of it, because this time, consensual hallucination will not fade, it will just keep going?
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