Shares of video streaming hardware and software provider Roku Inc. (NASDAQ: ROKU) hit $101.88 in trading on June 8. The reason for this was rumors of a possible merger. What is the meaning of this agreement?
The news came from Business Insider, which reported that there were rumors among Roku employees that the company could be sold soon. There are no official reports: the assumptions of the employees are based on the fact that they had a limited ability to sell shares. This usually happens when an M&A deal announcement is being prepared.
The post immediately sparked speculation of a possible takeover. One potential buyer of Roke’s business is TV streaming provider Netflix Inc. (NASDAQ: NFLX). If so, official communication can send ROKU quotes.
The value of the Roku acquisition for Netflix is unclear. Of particular interest may be the Roku advertising platform, where Netflix can implement additional tools to monetize its content. Roku’s audience exceeds 60 million accounts, which will greatly increase Netflix’s advertising potential.
At the same time, for Netflix, it may now be more relevant to create new content to retain and grow audiences. At the same time, buying Roku might not be so successful. The popularity of the Roku platform is largely due to the fact that it is independent and provides access to all Internet television services.
Netflix’s acquisition of Roku could cause competitors to abandon the platform and, as a result, a sharp drop in Roku’s advertising audience. The competition between streaming services is very different from cable TV and is almost entirely on the content side.
Internet TV users are extremely mobile, they subscribe to the service to watch the series they like, and they can easily unsubscribe in favor of a competitor. Netflix can’t spend more on content than Disney.
Roku Inc. (ROKU) stock is up 12.24% over the week and 16.08% over the past month. Its price is -55.35% year-to-date and -70.00% over the past year.