On Tuesday, June 16, Fitbit Inc. raised the target price of their initial public offering (IPO), indicating growing optimism over fitness tracking technology. The unconventional branch of hardware products is targeted towards a new breed of data-hungry consumers.
Since 2007, the San Francisco-based company has sold 20.5 million wearable devices that track the user’s daily steps, distance traveled, and calories burned.
The firm’s hotly anticipated IPO is set to open between $17.00 and $19.00, up from the earlier estimates of $14.00 to $16.00. The number of shares also increased from 7.5 million to 12 million.
Defending with Deep Pockets
The company has seen rapid sales growth, topping off at $745 million in 2014. However, as the market for fitness tracking devices garners more and more attention, Fitbit’s dominance is being threatened by corporate juggernauts. Right now the company has 85% of the market.
Under the most optimistic scenario, the IPO would raise over $750 million, but Fitbit is expecting closer to $373.9 million in funding. If demand for the offering exceeds expectations, there is an option to sell additional shares. Legal costs are also expected to rise since Jawbone, a competitor, brought charges against Fitbit for allegedly poaching employees and stealing trade secrets.
Keeping a Competitive Advantage
The company posted earnings of $131.8 million last year. Analysts are positive about the company’s ability to turn a profit, but are concerned about rising competition. The firm acknowledges the challenges of being an incumbent, declaring that proceeds from the IPO will be used for research, development, and acquisitions.