Fitbug falls back to earth with a bump

Wearable fitness device company, Fitbug, fell 25% yesterday and is down another 5% today on news of a £3.5 million discounted placing and management changes.

The company’s shares experienced an enormous rise from 0.4p in October to a high of 26p last month and is currently trading at 8p. The rise was caused by a listing of its Fitbug Orb product in Sainsbury’s and Target in late October and then a subsequent deal with Samsung in mid-November for its KiQplan online fitness platform. Small investors piled into the stock with the shares peaking on a tide of euphoria in early November following extensive coverage of the Samsung deal in the weekend press.

The placing at 9p was a 15% discount to the price before the announcement and is being used for general sales and marketing expenses and to shore up its balance sheet. Specifically the company said that “The funds raised will be predominantly used to scale up the sales and marketing push for both the Orb and the Kiqplan sides to the business, to meet fast growing demand for wearable technology and complementary products. The marketing drive will begin immediately, with the Company attending the Consumer Electronics Show (CES) in January and activating various marketing campaigns. Part of the funds raised will be used to develop further Kiqplan programs, and Fitbug aims to build out the Kiqplan library by two plans per month.”

In addition to the placing the company announced some management changes. Malcolm Fried, the CEO of Fitbug Holdings Plc, has decided to step down from the Company at the end of the year. Fergus Kee, Chairman, will revert to his previous position as Executive Chairman of the Company. Paul Landau, the founder of the Fitbug business, remains CEO of Fitbug Limited, the main operating company.

After a gain of over 6000% there was always a chance that City investors were going to be more sceptical of the company’s prospects given the competition in wearable fitness technology, sizeable debt and also the impending court case with U.S. Fitbit early next year. Clearly 26p was severely over egging things and the current 8p seems a more realistic price given the major unknown of how well the Fitbug device is selling –  still not a bad rise from 0.4p!

Contrarian Investor UK

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