Forest Road Acquisition (FRX) jumps 40% on Friday morning - is this the next Peloton (PTON)

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Forest Road Acquisition Corp (NYSE: FRX) jumped more than 40% on Friday morning following the new IPO company filing with SEC on Thursday. However, the stock price settled at a 25% gain as of 11:55 a.m. EST. However, this is not the only news since earlier this month the company announced a three-way combined business with Beachbody and MYX Fitness.

Summary

  • Forest Road Acquisition Corp (NYSE: FRX) jumps 40% on Friday morning following Thursday’s IPO filing with SEC.
  • Forest Road Acquisition II will be listed on the NYSE under the ticker symbol FRXB.U and will be TMT focused with the former Disney executives being the co-CEOs are leading the trust of investors.
  • Investors seem to be more interesting in the three-way combined company with Beachbody and MYX Fitness that will be completed in the second quarter of 2021. The pro forma shows a valuation of almost $3 billion.
  • “With brands such as P90X, INSANITY and 21 Day Fix, Beachbody has consistently expanded its market share over the past two decades through its proven model of integrating the most comprehensive library of premium fitness content with easy-to-follow nutrition guidance and supplements,” Forest Road said in a statement. 

 

About Forest Road Acquisition Corp.

Forest Road Acquisition Corp (NYSE: FRX) is a blank check company backed by The Forest Road Company. As with every other blank check company, FRX was created for the purpose of mergers, asset acquisitions or business combination with one or more businesses.

The company is interested in the technology, media and telecommunications (TMT) sector. As mentioned above Forest Road Company is the sponsored managing member of FRX with a diverse team in the areas of real estate, tax advisory, lawyers and award-winning filmmakers. It is led by Co-CEOs and Co-Chairmen Thomas Staggs and Kevin Mayer, the chief financial offer and executive vice president of Disney (DIS) and current board member of Spotify (SPOT) and Mayer, the CEO of TikTok and COO of BytaDance and ex-Chief Strategy Officer of Disney respectively.

The new TMT-focused IPO company

Forest Road Acquisition Corp (FRX) managed to raise $261 million in November 2020 and is currently in talks for the acquisition of The Beachbody Company. On Thursday, Forest Road Acquisition II, the second blank check company formed by The Forest Road targeting TMT space, filed for an initial public offering (IPO) with the Securities and Exchange Commission (SEC) to raise up to $300 million. The New York based company plans to offer 30 million shares at $10 per share. The new company will be listed also on the New York Stock Exchange (NYSE) under the ticker symbol FRXB.U.

According to a Motley fool, the SPAC company has announced earlier this month a three-way merger with the Beachbody Company and MYX Fitness. This merger will value the combined company at almost $3 billion and this is because ever since the pandemic the working out at home applications has grown dramatically. “With brands such as P90X, INSANITY and 21 Day Fix, Beachbody has consistently expanded its market share over the past two decades through its proven model of integrating the most comprehensive library of premium fitness content with easy-to-follow nutrition guidance and supplements,” Forest Road said in a statement. 

Forest Road acquisition stock chart

About Beachbody Company

Beachbody has a membership option for Beachbody on Demand acting like a streaming platform that combines nutrition and fitness in one place. Like any other streaming service, the company charges a monthly or yearly subscription fee. People get a whole new community of people, connected with fitness and nutrition consultants and live classes from certified trainers. Furthermore, it connects people to a wide variety of special protein shakes and bars.

One of its most attractive products it’s the high-end bike with a screen that can actually move and be adjusted to everyone and can even be used for yoga and Pilates. The bike can be connected to a smartwatch for calculating time, calories, heartbeats and the overall performance of the exercise. Beachbody also sells free weights that can be added to the bike for better results.

Beachbody has already reached 2.6 million paid digital subscriptions with an 89% margin on all digital subscriptions. The engagement is 32% which can be argued however 96% of the people that sign up will stay for a second month and will not leave after the first month of the subscription.

Many people have been wondering if this is another pyramid scheme since it has the component of signing up “coaches” to promote the products and services of the firm. Beachbody is a multi-level-marketing (MLM) company such as Herbalife, Avon, etc. Coaches that sign up to give direct services to customers in order to receive a commission on every product they sell. The number of registered coaches stands at 400,000. In other words, 400,000 people are selling the company’s products on a daily basis.

Beachbody will go public through the merger with FRX and MYX Fitness to become The Beachbody Company. The transaction will be finalized in the second quarter of 2021 and the company will be listed on the New York Stock Exchange under the ticker symbol “BODY”.  The deal gives it a pro forma valuation of $2.9 billion and will add $420 million in cash to its balance sheet including a committed PIPE of $225 million.

Bottom Line

It seems that investors are jumping in because of the three-way combined merger with Beachbody and not because of the initial public offering filing that happened on Thursday. Similar businesses in the fitness area, is Peloton Interactive (NASDAQ: PTON).

The company is selling gym equipment such as treadmills and bikes that was proved to be a necessity during the pandemic. The stock went IPO with an initial price of $29 and it is now traded more than $150. It is obvious that the pandemic was the biggest contributor to the stock price success and investors might think that the same will happen with Beachbody and FRX. Investors that missed out on Peloton might also consider this stock as the next Peloton. At the end of the day, the whole world is still in lockdowns with no access to gyms which adds to investors’ interest.

Disclaimer – I/we have no position in any stock mentioned. I wrote this article myself, and it expresses my personal opinions. I am not receiving any compensation for it, other than FDGT Academy. I do not have or had in the past any business relationship with any company that is mentioned in the above article.