Small caps last week: Peloton on Spotify, biotech M&A, small-cap ETF leaders

This week, we learned that Peloton workouts are coming to Spotify. Meanwhile, Indian drugmaker Sun Pharma will acquire women’s health company Organon, while Italy’s Chiesi is buying rare disease therapy developer KalVista. Among small-cap ETFs, the top performers in the first quarter turned out to be funds that have gained from the Iran conflict and the resulting energy shock. Below is a roundup of these and other key developments in the small-cap segment from April 27 through May 1.

Analyst Aldiyar Anuarbekov examined which small-cap ETFs benefited from the energy shock in the first quarter. Oninvest’s screen included 38 small-cap ETFs. The top performer was First Trust Small Cap Value AlphaDEX ETF, which returned 8.6%. Notably, eight of the fund’s 10 largest holdings are energy companies. The fund’s largest holding is Kosmos Energy, an oil and gas producer with assets in Africa and the Gulf of Mexico, whose shares rose alongside the spike in oil prices.

Among international small-cap ETFs, the top performer was Avantis International Small Cap Value ETF. Financials (25%), consumer stocks (18%), and energy (20%) account for the largest shares of the portfolio – these are same sectors that rallied amid the oil-driven market rotation.

Peloton Interactive – a small-cap maker of fitness equipment – has entered into a partnership with streaming platform Spotify. Fitness and wellness content will now be available to Spotify Premium subscribers in most of the markets where the service operates. Following the deal, Peloton shares gained 2.5% on Monday, reaching their highest level since early February.

However, Motley Fool contributor Neil Patel considers buying Peloton risky. It has been struggling for years to overcome the post-pandemic sales slowdown. Patel notes that Peloton guides for revenue to decline 3% in its fiscal 2026. Since the start of the year, Peloton shares have fallen 11.5%. Wall Street remains divided: 10 analysts have "buy" calls on the stock, 11 "hold," and only one "sell."

Mid-cap women’s health drugmaker Organon said it will be acquired by major Indian pharmaceutical company Sun Pharma. The offer price of $14 per share represents a 103% premium to Organon’s share price before media reports emerged about a potential acquisition. Markets were reacting positively to the announcement: on Monday, Organon shares surged about 17% intraday to their highest level in a year.

Following the merger, Sun Pharma, with combined revenue of $12.4 billion, is expected to rank among the world’s top 25 pharmaceutical companies. The transaction follows a corporate scandal at Organon: in October, the company parted ways with CEO Kevin Ali after an internal investigation uncovered improper sales practices involving the Nexplanon contraceptive implant. The product was sold in volumes exceeding customer needs in order to help the company meet internal targets. Currently, two analysts rate Organon shares “hold,” while two recommend “sell.”

Shares of KalVista Pharmaceuticals – a small-cap developer of rare disease therapies – rose 39% in trading on Wednesday. The biotech company announced it will be acquired at a premium by Italian drugmaker Chiesi. The transaction is valued at $1.9 billion and implies a 36% premium to KalVista’s 30-day volume-weighted average share price.

KalVista’s portfolio consists of a single asset – EKTERLY, the “first and only” oral treatment for hereditary angioedema, a rare genetic disorder that causes uncontrolled swelling of the skin, face, abdomen, and throat and can become life-threatening. The companies expect to close the transaction in the third quarter.

Freedom Broker recommends paying attention to shares of crude tanker operator Frontline, which could gain about 15% on a two-month investment horizon. The key driver is longer shipping routes: each additional day at sea effectively reduces available fleet capacity, pushing freight rates higher. Since the start of the year, Frontline shares have surged 66%. However, OilPrice warns that tanker freight rates are cyclical, and a diplomatic breakthrough could quickly erase part of the gains. Still, Wall Street remains broadly bullish: Frontline shares currently have nine “buy” ratings, three “hold,” and only one “sell.”

Meanwhile, Motley Fool contributor Will Healy recommends avoiding shares of Rigetti Computing or buying them only for speculative purposes. Concerns center on the company’s financial condition: in 2025, revenue fell nearly 35% to $7 million amid the suspension of a government contract renewal and delays in the launch of its new Cepheus-1-108Q quantum system. Not all analysts agree with Healy, however: the stock currently has 10 “buy” ratings versus three “hold” and one “sell.”