Why mattress stocks are increasing today
What happened
Mattress company shares Select Comfort (SNBR -0.90% ) and Tempur Sealy International (TPX 0.11% ) surged Thursday amid speculation that an acquisition or merger in the mattress industry was underway. Select Comfort stock was up around 12% at 11:45 am, while Tempur Sealy stock was up around 6%.
So what
This speculation about a deal in the mattress industry comes from Dealreporter. Adding to the drama: Tempur Sealy struck a standstill deal on June 26 with director Usman Nabi which, among other things, bans the disclosure of confidential information and restricts trading in the company’s stock.
Tempur Sealy is the larger of the two companies, with annual sales of $ 3.1 billion and a market capitalization of $ 2.9 billion. The smaller Select Comfort generated $ 1.3 billion in revenue last year and is valued at $ 1.6 billion. If Tempur Sealy were to acquire Select Comfort, it would create a mattress giant with nearly $ 4.5 billion in annual sales.
The mattress industry has been turned upside down in recent years by start-ups like Casper. These companies manufacture foam mattresses and mail them to customers, offering a generous return period, often 100 days. Casper would almost have sold himself to a retailer Target earlier this year; in the end, he raised money in a round table led by Target. His mattresses are also now available at Target stores.
Given the disruptions that are occurring in the mattress industry, a rapprochement between two major players is not overstated.
Now what
Shares of Select Comfort and Tempur Sealy are on the rise following the thinnest rumors. While it can be tempting to buy stocks in the hope that a deal will be struck, investing solely on the basis of rumor and speculation is a recipe for disaster. It is impossible to know the chances of a deal being reached, or even if talks will take place.
That said, the success of mattress newbies like Casper is putting pressure on established players in the industry. I wouldn’t bet on it, but a merger between Tempur Sealy and Select Comfort is definitely on the cards.
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