The House of Cards: iRobot Stumbles on European Regulator’s Reported Plan to Halt Sale to Amazon

iRobot (NASDAQ:IRBT) suffers massive 40% drop in after-hours trading following reports that the European antitrust regulator is poised to obstruct the anticipated $1.7 billion acquisition by Amazon (NASDAQ:AMZN).

European Regulator’s Concerns

According to sources, European Commission officials met with Amazon (AMZN) representatives on Thursday to discuss the transaction, as reported by the Wall Street Journal. The purported rejection of the deal was explicitly conveyed to Amazon during the meeting. However, Amazon has declined to comment on these developments.

Univocal Investor Concerns

iRobot shares plummeted by 20% last Wednesday, triggered by news that Amazon had not submitted any concessions in Europe to allay the fears of antitrust regulators. This news comes on the heels of the European Commission’s warning in November, where it raised objections to the sale of the robot vacuum giant to Amazon.

Notably, iRobot shares, including those in after-hours trading on Thursday, have nosedived by a staggering 53% this week. Investors are gripped by anxiety surrounding the European Commission’s review and the anticipated scrutiny from the Federal Trade Commission, particularly after a federal judge thwarted JetBlue’s (JBLU) acquisition of Spirit Airlines (SAVE).

Rife Speculation and Ominous Indicators

Traders are apprehensive that the FTC may opt to litigate against Amazon’s purchase of the Roomba robot maker. The European Commission has already expressed reservations about the sale, and a final decision is expected by Feb. 14.

The FTC recently disclosed that it will convene a closed-door meeting next Wednesday, fueling speculation that the meeting might pertain to the iRobot/Amazon transaction. In the event of a collapsed deal, traders fear a drastic downside for iRobot stock.

Erratic Reports and Uncharted Waters

Contradicting Tuesday’s report, which hinted at the EC’s consideration of granting unconditional approval, the Wall Street Journal’s latest report paints a more turbulent picture. It suggests that approval is by no means certain, with the EC potentially challenging the merger.

An informal poll conducted by Bloomberg in late November among several merger arbitrage specialists foresees significant downside, with estimates ranging from $5 to $12 per share in the event of a failed deal.