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Why iRobot Stock Dropped 14% This Week

Motley Fool - Thu Nov 30, 2023

Shares of iRobot (NASDAQ: IRBT) are down 12.9% this week as of Thursday's close, according to data provided by S&P Global Market Intelligence. They gave up a healthy chunk of last week's gains after European antitrust regulators expressed objections to Amazon's (NASDAQ: AMZN) pending acquisition of the home-robotics leader.

Mixed signals from European regulators on iRobot's acquisition

For perspective, iRobot stock ended last week on a high note by rallying nearly 40% last Friday after Reuters reported Amazon was set to win unconditional approval from European regulators to close on the acquisition. The European Commission (EC) previously opened an investigation into the deal in July.

On Monday, however, shares of iRobot fell nearly 20% after the EC sent a statement of objections to Amazon detailing its concerns surrounding the deal. In particular, EC officials say they're worried that as a merged entity, Amazon and iRobot could engage in "several foreclosing strategies aimed at preventing rivals from selling [robotic vacuum cleaners] on Amazon's marketplace."

They also say Amazon would likely gain more from additional sales of iRobot vacuum cleaners than it would lose from fewer sales by iRobot's rivals and other related products on Amazon. The benefits would include data gathered from iRobot's users.

What's next for iRobot investors?

I still think Amazon will ultimately be given the green light to move ahead with its purchase of iRobot. Curiously, a subsequent update from Reuters on Wednesday revealed that EC lawyers initially opposed sending the warning to Amazon, arguing it wasn't warranted.

This lends credence to initial reports that Amazon was poised to receive their unconditional approval. But it also suggests that the EC doesn't want to take too easy a stance toward the merger, and it might request certain concessions from Amazon to ensure it won't stifle competition.

I personally sold my shares of iRobot shortly after the initial acquisition was announced 15 months ago. But assuming the latest agreed acquisition price of $51.75 per share still holds (with iRobot stock currently trading around $36), there could be some upside for opportunistic investors willing to bet the deal goes through.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Steve Symington has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and iRobot. The Motley Fool has a disclosure policy.

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