Fitbit Flex

Fitbit Toast Very Positive Initial Public Offering

June 19, 2015 - Written By David Steele

Fitbit is one of the world’s leading technology wearable manufacturers and software developers. In their recent legal activity with Jawbone their initial response was the equivalent of, “we didn’t do it, we don’t need your technology.” However, there has been something that Fitbit need and this is cash. To this end, Fitbit have floated on the stock exchange. Their IPO, Initial Public Offering, has been a success too. The stock was priced at the IPO for $20 and closed at $29.68, almost 50% higher and this is after Fitbit raised the initial price out of the original $17 to $19 range and released additional shares, with 36.6 million sold instead of 34.5 million. This sale values the business at a shade over $4 billion and raised $732 million for itself and selling stakeholders.

The decision to offer stock to the public market is something that many business owners dream of, but it is not always a clear cut decision. Stockmarkets require a certain level of transparency and timeliness in announcing changes to the business and other factors that shareholders observe. Business stakeholders are often invested in the business for the longer term whereas investors buying the stock on the market may have a shorter time horizon, which can cause price volatility. Fitbit’s stock had enjoyed significant gains already but the stock price may fall too: it’s difficult not to be too focused on the short term movements in the price and instead try to look through the volatility and stock price “noise.” However, despite the regulation of a stockmarket it is often a cleaner, easier way to raise money for business expansion and this is when things get interesting.

So far, Fitbit has sold well at the simpler end of the wearable technology market and the range of wearable fitness trackers have been improved over time and been reduced in price, but are facing stiffer competition. The market is also changing and we are seeing consumers shift into buying more and more sophisticated devices, which are also getting cheaper too. Fitbit’s Chief Executive, James Park, had this to say on the matter: “We are the clear market leader with 85 percent market share. Fitbit is synonymous with health and fitness tracking, and that gives us a competitive advantage in the marketplace. [The cash from the IPO] … gives us a lot of capital to grow the business.” This is likely to mean investments in software, hardware and perhaps even other businesses (Fitbit purchased fitness application developer, FitStar, earlier this year). Yes; the cheaper more sophisticated smartwatches are getting cheaper and but Fitbit has significant market presence and is the clear American market leader with 85% share.