Fitbit surges more than 50% in trading after IPO

Company and backers raise $732m in flotation after demand sees it add shares on offer

People reach for free Fitbit Inc. shirts after the company’s initial public offering outside of the New York Stock Exchange. Photographer: Michael Nagle/Bloomberg

People reach for free Fitbit Inc. shirts after the company’s initial public offering outside of the New York Stock Exchange. Photographer: Michael Nagle/Bloomberg

 

Fitbit surged in its trading debut, after heavy demand for the company’s initial public offering led it to boost the size of the deal.

The shares rose 51 per cent to $30.27 as of 11:36 a.m. in New York.

Fitbit and some of its backers raised $732 million after selling the stock for $20 apiece.

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 can 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 to $745.4 million. Its devices range in price from the $59.95 clip-on Zip that 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’s smartwatches to Xiaomi’s lower priced monitors.

One way it plans to stay ahead is by spending more on research and development, chief executive James Park said in an interview.

“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.”

Another rival, Jawbone, is suing Fitbit, alleging it infringed on patents, stole employees and plundered trade secrets. Mr 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 31st after selling 20.8 million devices since 2011.

Investor demand for Fitbit’s shares has been evident since early this week. On Tuesday it boosted the price range and size of the offering. A day later it said it had sold even more shares than expected, above the $17 to $19 range, raising about $254 million more than it had initially set out to.

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, which makes wearable cameras, and Garmin, which makes activity trackers and GPS devices. – Bloomberg