Fitbit, the creator of smart wearable devices that collect data on exercise and sleep patterns is looking forward to raise around $500 million in an initial public offering (IPO).
The San Francisco-based company plans to offer 29.85 million Class A shares for $14 to $16 per share, according to the prospectus filed on Tuesday. The company is expected to be price its IPO on June 17. At this range of high-end offering the company’s valuation would increase to about $3 billion, which would overtake GoPro as most successful Silicon Valley-based consumer-electronic startup. Bankers sold GoPro’s extra shares (on overallotment) to push the total value of the company’s IPO to $491.3 million. GoPro was the first company to top electronic launch overtaking Duracell’s performance in 1991.
Fitbit runs a profitable business that generated a revenue of $745 million last year from $271.1 million in the year of its launch and showed a net income of $100 in 2014. It is the most successful wearable with the total sales topping $1 billion this year. However, as the company wants to attract more investors, it should be capable enough to show good growth level despite of increased competition and the inclination of users to stop using the band after few months of usage. A study on 1700 customers by Endeavour Partners, a consulting firm, shows that it is normal tendency of more than one-third of the fitness track users to dump the wearable after six months of usage.
Also, the launch of the Apple watch and other capable smartwatches creates a doubt whether Fitbit will be capable to continue to dominate the smart wearable sector. “The smartwatch may kill off or stymie the growth of lower end fitness bands,” stated Julie Ask, the Forrester Research analyst in a blog. Competitors like Jawbone are also out for Fitbit which recently claimed Fitbit abduction of its company employee who took intellectual property with them.
The whole point is whether Fitbit would be able to survive all this. Fitbit is working to produce better software offerings and related health content to grow much beyond its core fitness bands and to expand globally. “We will continue to introduce innovative new features and services to increase user engagement and revenue,” the company stated so with the special mention of its acquisition of Fitstar, that provides personalized training.
The smart wearable maker states its company strategy to accelerate growth consists of introducing more products and services, increasing marketing efforts, expanding distribution globally and building relationships with various other organizations for employee wellness programs.
Fitbit, founded by James Park and Eric Friedman, plans to use the new funds from the IPO for research and development, sales and marketing, capital expenses and on mergers and acquisition. It is expected the co-founders will both sell nearly 700,000 shares from their identical stakes of about 20 million shares. Fitbit devices range from $99 to $250 and sells it in more than 45,000 retail stores.