Roku is exploring strategic alternatives, including a possible sale of the company, according to a Reuters report citing six people familiar with the matter.
The streaming platform company has reportedly held discussions with at least one U.S. media company regarding a potential combination, although no final decisions have been made. Reuters also reported that Roku has explored other alternatives, including a private investment in public equity (PIPE) transaction.
News of the discussions sent Roku shares up 22%. The company currently has a market capitalization of approximately $19.4 billion.
Roku operates a broad streaming ecosystem that includes streaming devices, Roku-branded televisions, content distribution services, and a growing advertising business. The company’s platform generates revenue primarily through advertising and subscriptions associated with streaming applications available on its interface.
Advertising remains Roku’s largest source of revenue. In the first quarter, advertising revenue rose 27% year over year to $613 million.
In addition to advertising, Roku earns a share of subscription sign-ups for services such as Netflix and Amazon that are promoted through its platform. At the same time, the company operates its own free ad-supported streaming service, The Roku Channel.
The Roku Channel has emerged as a major growth driver for the company. According to Nielsen, it is the most-watched free streaming service available on Roku’s platform. However, the increasingly competitive free ad-supported streaming market includes rivals such as Fox-owned Tubi and Paramount’s Pluto TV.
Last year, Roku partnered with Amazon to enable marketers to purchase advertisements on The Roku Channel, even as Amazon also promoted its own free streaming offerings through Roku’s platform.
According to sources cited by Reuters, Roku’s audience of more than 100 million streaming households and the extensive viewing data it collects could make the company attractive to a range of potential acquirers, including media, technology, and advertising companies.
The company’s large installed user base and advertising capabilities are viewed as strategic assets amid intensifying competition across the connected television and streaming markets.
While discussions are ongoing, no agreement has been reached, and there is no guarantee that Roku will ultimately pursue a sale or any other transaction.
