Roku’s stock jumps 10% amid rumors of a Netflix acquisition
Roku employees have been speculating about the potential acquisition for several weeks since the company closed its insider trading window, making it impossible for them to sell their vested stocks, Business Insider reported first on Wednesday. Closing a trading window is widely understood to be a move to curb insider trading ahead of a significant business announcement.
Roku declined Fortune’s request for comment; Netflix did not respond.
While discussions between the two companies are unconfirmed, Netflix is looking to fix its business as it attempts to weather a tough start to the year. In April, Netflix announced an unprecedented loss of nearly 200,000 subscribers in its first quarter, with greater losses projected to follow. After that announcement, the company’s stock price immediately plunged 35%.
On Wednesday, Netflix’s shares rose 3%.
Netflix’s disappointing performance is partly the result of the pandemic, which caused a boom in streaming as people hunkered down at home—that then reversed as COVID ebbed. It’s also due to increased streaming competition over the past several years. While Netflix was unopposed when it debuted its streaming service in 2007, there are now over 200 rival services worldwide—including Amazon Prime and Disney+.
In an effort to reverse its slide, Netflix has slashed operating costs through layoffs. “Our slowing revenue growth means we are also having to slow our cost growth as a company,” the company said in a statement in May. “So sadly, we are letting around 150 employees go today, mostly U.S.-based.”
With a Roku acquisition, Netflix could reignite growth by accelerating its plans to debut an ad-based revenue model instead of one that relies solely on subscriptions, as many competitors have already done. Roku, which produces TV set-top boxes for digital media, also has its own ad-revenue-based streaming service that Netflix could integrate.
Roku, which spun out from Netflix in 2008 as an independent company, faces its own challenges. Like Netflix, it faces steep competition from streaming giants and a depressed stock price that, since July, has dropped nearly 80%.
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