Fitbit Secondary Offering Dominated by Insiders Selling Shares

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Fitbit Inc. (NYSE: FIT) has disclosed more details regarding a planned secondary offering. The maker of sports fitness tracking devices announced after Monday’s closing bell that the company will have a 21 million share secondary offering of its Class A common stock, or 24.15 million shares if the overallotment is exercised.¬†This also coincides with the share count that had been indicated with a filing from the prior week. In the offering, some 7 million shares will be sold by the company and the other 14 million shares will be sold by existing shareholders.

Acting book-running managers in the offering were listed as Morgan Stanley, Deutsche Bank Securities, Bank of America Merrill Lynch, Barclays and Citigroup. The co-managers, or the passive managers, were listed as SunTrust Robinson Humphrey, Piper Jaffray, RBC Capital Markets and Stifel. Fitbit has granted the underwriters a green-shoe 30-day option to purchase up to an additional 3,150,000 shares of the Class A shares to cover overallotments.

There is a difference here between the Class A and Class B shares. Each share of Class B common stock is entitled to 10 votes, versus one vote for the Class A shares. Each Class B share is convertible at any time into one share of Class A common stock.

As you usually see with secondary offerings, the company itself will not receive any proceeds from the sale of the shares by the selling stockholders. Fitbit did make note that the holders of its outstanding Class B common stock will hold approximately 96.0% of the voting power of Fitbit’s outstanding capital stock following this offering. Of that, its directors, executives and significant holders and their affiliates will hold approximately 76.7%.

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What matters here for the capitalization purposes after the offering, including the overallotment option shares, is that the total Class A and Class B common stock outstanding after this offering will be 215,335,609 shares. That puts Fitbit’s market cap at $8.06 billion as of Monday’s $37.46 closing price.

Fitbit shares were indicated down only 0.7% at $37.20 on the heels of this amended filing, and the post-IPO range is $29.50 to $51.90.

Key share sales were noted as follows:

  • James Park (co-founding chairman and CEO) has 19,499,700 shares, but he is selling 2,226,980 shares.
  • Eric N. Friedman (co-founding chief technology officer) has 19,546,044 shares, but he is selling 1,113,490 shares.
  • Jonathan D. Callaghan (director) has 37,731,585 shares, but he is selling 3,782,381 shares.
  • Steven Murray has 9,343,572 shares, but he is selling 936,641 shares.
  • Foundry Group Funds has 42,182,122 shares but is selling 4,228,523 shares.
  • SoftBank PrinceVille Investments holds 9,343,572 shares but is selling 936,641 shares.

Both Ameriprise Financial and Blue Ridge Capital will be keeping their shares the same.

As a reminder, Fitbit’s IPO priced at $20.00 per share for closer to a $4.4 billion market cap. The original $14 to $16 range had been raised to a range of $17 to $19 before the deal priced. Fitbit’s post-IPO range has been $29.50 to $51.90.

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