Shares of Fitbit surge in Wall Street debut
Maker of fitness trackers sees its valuation top $6 billion as stock price climbs 48 per cent
NEW YORK— Fitbit Inc. surged in its trading debut, after demand for the company’s initial public offering led it to boost the size of the deal.
The shares rose 48 per cent to close at $29.68 (U.S.) in New York trading Thursday for a market value of $6 billion. Fitbit and some of its backers raised $732 million after selling the stock for $20 a share.
The San Francisco-based company’s appeal lies in its strong position in the fast-growing market for wearable technology, in this case fitness trackers that monitor everything from heart rate to sleep patterns. Fitbit is profitable — making it a standout among recent technology IPOs — with sales that nearly tripled last year.
Fitbit’s devices range in price from the $59.95 clip-on Zip, which tracks steps and distance, to the $249.95 Surge, which includes a heart-rate monitor. For these, the company faces a range of competition from Apple Inc.’s smartwatches to Xiaomi Corp.’s lower-priced monitors.
One way it plans to stay ahead is by spending more on research and development, chief executive officer James Park said in an interview on Bloomberg Television.
“This year we’re tripling R&D spend — most of it is in software, but we do continue to innovate in hardware,” he said.
“It’s all about making fitness very fun and engaging. We’re investing a lot in software R&D to make that happen.”
Another rival, Jawbone Inc., is suing Fitbit, alleging it infringed on pa- tents, stole employees and plundered trade secrets. Park said he couldn’t comment on legal strategy.
Fitbit also needs to keep its current users active. A third of smartwatch and activity-tracker owners abandon their device after six months of use, according to a survey of 1,700 consumers by consulting firm Endeavour Partners in July 2014. Fitbit said it had 9.5 million paid active users as of March 31 after selling 20.8 million devices since 2011.
At its opening price Thursday, Fitbit was valued at about $6.15 billion, or about 8.2 times 2014 sales. That’s more than twice the average multiple fetched by GoPro Inc., which makes wearable cameras, and Garmin Ltd., which makes activity trackers and GPS devices.