Fit­bit flexes its mus­cle in stock de­but

Strong IPO raises ques­tions be­cause the fit­ness tracker has plenty of ri­vals.

Los Angeles Times - - BUSINESS - By James F. Peltz

Fit­bit Inc.’s stock soared in its de­but Thurs­day in re­sponse to rapid growth for the in­dus­try leader in fit­ness-track­ing de­vices.

But the rally, com­ing amid a sharp rise in val­u­a­tions for tech­nol­ogy firms over­all, raised the ques­tion of whether Fit­bit’s stock was get­ting a step ahead of it­self be­cause Fit­bit faces no short­age of ri­vals.

Af­ter San Fran­cis­cobased Fit­bit priced its ini­tial public of­fer­ing at $20 a share — well above early ex­pec­ta­tions — the stock with the sym­bol “FIT” closed at $29.68 on the New York Stock Ex­change af­ter trad­ing as high as $31.90.

That gave Fit­bit a to­tal mar­ket value of $6.1 bil­lion. Fit­bit sold 36.6 mil­lion shares in the IPO out of nearly 205 mil­lion to­tal shares out­stand­ing, rais­ing $732 mil­lion for the com­pany.

The pro­ceeds were the high­est for a U.S.-listed tech com­pany IPO so far this year, ac­cord­ing to the re­search firm Dealogic Ltd.

Fit­bit’s mar­ket jump “was a lit­tle north of what I ex­pected but not too sur­pris­ing ” be­cause Fit­bit not only leads a fast-grow­ing in­dus­try for wearable track­ing de­vices but is also prof­itable, said an­a­lyst Ra­mon Lla­mas of the re­search firm In­ter­na­tional Data Corp.

In a note posted on Fit­bit’s web­site, Chief Ex­ec­u­tive James Park called the of­fer­ing “a huge mile­stone for us … we can’t wait to see what’s next.”

Fit­bit’s de­vices and other ac­tiv­ity track­ers have gained pop­u­lar­ity for their abil­ity to count steps, mon­i­tor calo­ries burned and track time spent sleep­ing, among other things, which ap­peals to health-con­scious, data-ob­sessed con­sumers.

Founded in 2007, Fit­bit pro­vides a mul­ti­plat­form ap­proach to health and fit­ness, in­te­grat­ing mo­bile apps and web­sites with col­or­ful track­ing de­vices that can be worn as bracelets or

clipped to cloth­ing.

Fit­bit’s sales last year of $745.4 mil­lion were nearly 10 times its sales of $76.4 mil­lion two years ear­lier. Fit­bit turned a $131.8-mil­lion profit in 2014.

Last year the com­pany sold 10.9 mil­lion de­vices — sug­gested re­tail prices range from $59.95 to $249 — in 45,000 re­tail stores in more than 50 coun­tries as well as online, ac­cord­ing to the IPO’s prospec­tus.

In the first quar­ter of this year, Fit­bit had a lead­ing 34.2% of world­wide ship­ments of wearable de­vice track­ers, IDC es­ti­mated.

In a re­port Thurs­day, IDC said the in­dus­try’s global ship­ments will more than dou­ble this year, to 72.1 mil­lion from 26.4 mil­lion in 2014, and are forecast to jump to 155.7 mil­lion in 2019.

The fit­ness de­vices are part of an ex­plod­ing wearable com­put­ing mar­ket. Touted as the next big thing in tech­nol­ogy, wearable tech has spawned a dizzy­ing ar­ray of In­ter­net-con­nected wrist­watches, “smart” cloth­ing and jew­elry and head­mounted de­vices.

But com­pe­ti­tion is stiff in the fit­ness-track­ing arena, with Fit­bit fac­ing ri­val prod­ucts from Jaw­bone, Mis­fit and Garmin, along with China’s Xiaomi Inc., which makes the Mi Band de­vice.

Then there’s Ap­ple Inc.’s new smart­watch, which Fit­bit’s prospec­tus noted was a po­ten­tial risk for its fu­ture busi­ness be­cause the Ap­ple de­vice will have “some health and fit­ness-track­ing ca­pa­bil­i­ties.”

Although it’s im­pos­si­ble to know how much of a threat the Ap­ple Watch or smart­phone fit­ness apps will pose to Fit­bit, there are cau­tion­ary tales. For in­stance, the pro­lif­er­a­tion of smart­phones with GPS un­der­cuts the sales of ex­pen­sive dash­board GPS nav­i­ga­tion sys­tems.

Re­search firm GfK pre- dicted in a re­cent re­port that smart­watch sales will surge this year, partly be­cause of heavy mar­ket­ing, and will sur­pass fit­ness tracker sales for the first time.

Fit­bit has stum­bled at times. Last year, the com­pany re­called its Fit­bit Force tracker af­ter some cus­tomers com­plained of rashes and blis­ters on their wrists.

Fit­bit’s strong IPO joined surg­ing val­u­a­tions of tech com­pa­nies, fu­el­ing con­cerns about another tech bub­ble.

Based on cap­i­tal al­ready raised, non­pub­lic start-ups such as ride-shar­ing firm Uber Tech­nolo­gies Inc. and video-mes­sag­ing ap­pli­ca­tion Snapchat Inc. com­mand multi­bil­lion-dol­lar val­u­a­tions. New in­vest­ments in ven­ture-cap­i­tal funds jumped to $30 bil­lion in 2014 from $17.7 bil­lion in 2013, the Na­tional Ven­ture Cap­i­tal Assn. said. In­vest­ments in start-ups hit $49.3 bil­lion last year, the most since 2000 and the third­high­est ever, the group said.

Pho­tog raphs by Richard Drew As­so­ci­ated Press

FIT­NESS EX­PERT

Har­ley Paster­nak and ac­tress Jor­dana Brew­ster lead a work­out on be­half of Fit­bit at the New York Stock Ex­change.

JAMES PARK, Fit­bit’s CEO, called the stock of­fer­ing “a huge mile­stone for us.”

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