London - There's a lot of money in those plastic bracelets. James Park, the chief executive of Fitbit, found himself around $700m (£440m) richer on Thursday following the company's initial public offering.
Unfazed, despite the incredible wealth now at his disposal, he told a television interviewer: “Overall, a pretty exciting experience... At the end of the day, most of it will be given away, so I try not to think about it.”
The manufacturer of electronic activity-tracking bracelets raised $732m of new capital at $20 per share in an IPO that valued the company at around $4.1bn.
The shares were priced slightly higher than the expected range of $17 to $19.
When trading began, the stock surged more than 60 percent higher than its offer price to more than $32, giving the company a valuation of $6.3bn. Park retains an 11.2 percent stake in Fitbit despite selling around $15m worth of stock in the flotation.
In a market that still appears to value technology potential far higher than real revenue and profitability, Fitbit is unusual in that it is already making money. According to its pre-IPO filings, its net income for the first quarter of 2015 was $48m, up from $9m in the first quarter last year. For the full 2014 year, the company made a net profit of $132m based on revenue of $745m, with no debt on its balance sheet.
Fitbit may need some of its new-found wealth to fight legal battles. A rival activity-tracking technology company, Jawbone, has launched a lawsuit against it for a second time, alleging that it has infringed its intellectual property. Jawbone, whose earlier suit claims that Fitbit poached staff and bought trade secrets, is now suing over claims that it is illegally using technology developed by BodyMedia, a company acquired by Jawbone for $100m in 2013. Fitbit says it will “vigorously defend itself against these allegations”.
Even if Fitbit were to lose either case, willing investors appeared to be in decent supply. An initial range of $14 to $16 was revised upwards following strong interest, and the final price was raised even higher due to oversubscription. Perhaps such interest is not surprising - in terms of recent technology opportunities, Fitbit is a profitable company with an established brand in a rapidly growing market.
Wearable technology is hot, particularly in terms of devices that help wearers to track their activity and fitness levels. The market is expected to grow significantly over the next few years, with some analysts predicting a tenfold increase in the number of units sold each year between now and 2018.
Fitbit, founded in San Francisco in 2007, controls almost 70 percent of the American market. Its products - bracelets and clip-on trackers - are sold in 45 000 stores worldwide. Its technology allows the wearer to calculate the amount of exercise taken during the day, calories burned and even the duration and quality of sleep.
Fitbit and Jawbone have been joined in the wearable fitness-tracking market by Xiaomi, the Chinese cellphone manufacturer, and Apple, the world's largest company.
The Apple Watch has the capability to include fitness apps, although its underwhelming reviews, high price and short battery life have tempered the initial excitement brought about by its launch.
In March, the investment bank Morgan Stanley described the wearable technology market as “the fastest- ramping consumer-device market in history”.
The Independent