FIT - Fitbit

[nostradamus]

To me the Apple/Nike watch is a bit strange. It is basically just the Apple watch with Nike branding, which is an odd thing for Apple to do given the strength of its own brand.

 

An article suggesting that the price falls are overdone:

 

http://investorplace.com/2017/01/fitbit-inc-fit-stock-misunderstood/view-all/#.WH9n11PR-os

 

N.

[glorysk87]

Another absolutely massive guidance reduction from FIT announced this morning along with sizable layoffs at the company.

 

https://investor.fitbit.com/press/press-releases/press-release-details/2017/Fitbit-Announces-Preliminary-Fourth-Quarter-2016-Results/default.aspx

[Foreign Tuffett]

Is anyone still following FIT? I think there's potential given the low EV, but management spends money like a drunken sailor. The stock based comp in particular is ridiculous. They are guiding to $110 million in stock based comp in 2018!

 

It's almost like management wants the stock to tank so they can pull a Michael Dell and take the company private at a discount. It's either that or management has a startup like mentality (aka let costs balloon while gunning for massive growth).

[Contra123]

You have

- a company that was primarily B2C-focused

- that sells B2C hardware that displays and collects what could in principle be valuable data

- in an industry with no shortage of 'hot' B2C hardware unicorns, semi-unicorns or start-ups who had to be liquidated or acquired for pennies (Pebble; Jawbone; Doppler)

- with a dual-class stock structure that makes displacing the founder/CEO virtually impossible and renders any external shareholder pressure potential moot

- that is probably trying to pivot to B2B and position itself as a 'data' trove and ally to insurers / health plans

 

What are the odds the above is successful?  Can't think of successful analogies.  Maybe the Nokia mapping business and the long theses that were floating around on TomTom? Dunno....

[Liberty]

https://www.reuters.com/article/us-fitbit-m-a-alphabet-exclusive/exclusive-google-owner-alphabet-in-bid-to-buy-fitbit-idUSKBN1X71NY

[blainehodder]

There is now a near 14% merger arb to be had on Google's all cash offer for Fitbit at $7.35 a share. Fitbit is likely to be a good fit into your portfolio if it is long only for diversification. This is non correlated to market returns. Trumps DOJ unlikely to block such a small scale deal as there is no legal argument on data sharing or antitrust as:

 

1)) On data privacy concerns: “Google was already storing data for Fitbit users since Fitbit started linking its devices and digital healthcare services to its Healthcare Cloud last May. That partnership would likely continue even if the deal was blocked.” [1]

 

2) On antitrust concerns:  “Fitbit ranks fifth in the global wearables market with a 4.1% share, according to IDC's third-quarter numbers, putting it far behind Apple, Xiaomi, Samsung, and Huawei.” [1]

 

[1]  https://www.fool.com/investing/2019/12/19/will-regulators-derail-google-takeover-fitbit.aspx

 

What are your thoughts on this arb?  It is obviously really wide on skepticism the deal closes, but on what grounds can it really be blocked?

If left to their own devices Fitbit is likely bleeds out a slow death against Apple, who has 50% marketshare. Hard to see regulators block a deal which is actually likely to increase long term competition with the market leader.

 

If we look at the Looker deal as a guide, the DOJ will likely wrap up the investigation in under 3 months and the deal will go ahead. If there are data privacy concerns, the DOJ can simply mandate a consent decree limiting Google from using Fitbit data for ads. I see this closing in the first half of next year. No reasonable argument can be made against the deal on antitrust grounds, and no data privacy argument would require the deal to be busted.

[writser]

Agreed, it seems interesting. FIT dropped like a brick this month.

 

Regarding your point 1: I'm not 100% sure what the current exact data policy is but storing your user data in the Google cloud is not the same as letting Google analyze and use your user data. And I think that that distinction is relevant if you are looking at a monopoly in collecting and analyzing user data.

 

Completely agree on point 2. There appear to be competitors with big pockets.

 

From my armchair I'd say this acquisition doesn't look that problematic. However, Big Tech / Google is in the spotlights and how do you handicap regulators wanting to 'send a message'? I have a very hard time coming up with any probabilities. And the downside seems large. If Google isn't allowed to buy FitBit then Facebook will surely have a hard time stepping in. Also, what timeline are we expecting? If the DOJ takes thing a bit more seriously this time you are looking at a 6m+ / 9m+ timeframe combined with an unknown chance of a big drop. Is 14% still super attractive in that case?

 

FitBit is on my too-hard pile for now but I'm keeping an eye on it. Also, maybe this could be the one trade I make every once in a few years where it makes sense to do something with options.

[Foreign Tuffett]

There is now a near 14% merger arb to be had on Google's all cash offer for Fitbit at $7.35 a share. Fitbit is likely to be a good fit into your portfolio if it is long only for diversification. This is non correlated to market returns. Trumps DOJ unlikely to block such a small scale deal as there is no legal argument on data sharing or antitrust as:

 

1)) On data privacy concerns: “Google was already storing data for Fitbit users since Fitbit started linking its devices and digital healthcare services to its Healthcare Cloud last May. That partnership would likely continue even if the deal was blocked.” [1]

 

2) On antitrust concerns:  “Fitbit ranks fifth in the global wearables market with a 4.1% share, according to IDC's third-quarter numbers, putting it far behind Apple, Xiaomi, Samsung, and Huawei.” [1]

 

[1]  https://www.fool.com/investing/2019/12/19/will-regulators-derail-google-takeover-fitbit.aspx

 

What are your thoughts on this arb?  It is obviously really wide on skepticism the deal closes, but on what grounds can it really be blocked?

If left to their own devices Fitbit is likely bleeds out a slow death against Apple, who has 50% marketshare. Hard to see regulators block a deal which is actually likely to increase long term competition with the market leader.

 

If we look at the Looker deal as a guide, the DOJ will likely wrap up the investigation in under 3 months and the deal will go ahead. If there are data privacy concerns, the DOJ can simply mandate a consent decree limiting Google from using Fitbit data for ads. I see this closing in the first half of next year. No reasonable argument can be made against the deal on antitrust grounds, and no data privacy argument would require the deal to be busted.

 

DOJ isn't the only regulatory body that can block this, as the deal also requires EU regulatory approval.

 

EU's "Commissioner for Competition" Margrethe Vestager shortly after the deal was announced: "In general we have a concern if companies merge because of data."

 

https://www.business-standard.com/article/international/after-google-s-fitbit-deal-europe-s-antitrust-chief-fears-for-data-privacy-119110701697_1.html

[Tuxedostyle]

There is now a near 14% merger arb to be had on Google's all cash offer for Fitbit at $7.35 a share. Fitbit is likely to be a good fit into your portfolio if it is long only for diversification. This is non correlated to market returns. Trumps DOJ unlikely to block such a small scale deal as there is no legal argument on data sharing or antitrust as:

 

1)) On data privacy concerns: “Google was already storing data for Fitbit users since Fitbit started linking its devices and digital healthcare services to its Healthcare Cloud last May. That partnership would likely continue even if the deal was blocked.” [1]

 

2) On antitrust concerns:  “Fitbit ranks fifth in the global wearables market with a 4.1% share, according to IDC's third-quarter numbers, putting it far behind Apple, Xiaomi, Samsung, and Huawei.” [1]

 

[1]  https://www.fool.com/investing/2019/12/19/will-regulators-derail-google-takeover-fitbit.aspx

 

What are your thoughts on this arb?  It is obviously really wide on skepticism the deal closes, but on what grounds can it really be blocked?

If left to their own devices Fitbit is likely bleeds out a slow death against Apple, who has 50% marketshare. Hard to see regulators block a deal which is actually likely to increase long term competition with the market leader.

 

If we look at the Looker deal as a guide, the DOJ will likely wrap up the investigation in under 3 months and the deal will go ahead. If there are data privacy concerns, the DOJ can simply mandate a consent decree limiting Google from using Fitbit data for ads. I see this closing in the first half of next year. No reasonable argument can be made against the deal on antitrust grounds, and no data privacy argument would require the deal to be busted.

 

DOJ isn't the only regulatory body that can block this, as the deal also requires EU regulatory approval.

 

EU's "Commissioner for Competition" Margrethe Vestager shortly after the deal was announced: "In general we have a concern if companies merge because of data."

 

https://www.business-standard.com/article/international/after-google-s-fitbit-deal-europe-s-antitrust-chief-fears-for-data-privacy-119110701697_1.html

 

 

EU data protection body is concerned as well.

https://techcrunch.com/2020/02/20/google-gobbling-fitbit-is-a-major-privacy-risk-warns-eu-data-protection-advisor/

[Guest roark33]

Just from an investor in google's perspective, what are they buying, this business is just imploding.  If this takes more than a year to close, it's just amazing how rapidly they are losing.  They essentially gave up trying to move into the smartwatch and the fitness trackers--how is that really worth anything to google? 

[andreasl33]

I suppose they are buying a mobile operating system for devices smaller than what they could serve with Android. They could slim down Android but then it would be lacking features for phones and tablets. Sometimes it is just better to use something that was built from scratch for devices with very small batteries, very slow cpus, very small memory

[Castanza]

I suppose they are buying a mobile operating system for devices smaller than what they could serve with Android. They could slim down Android but then it would be lacking features for phones and tablets. Sometimes it is just better to use something that was built from scratch for devices with very small batteries, very slow cpus, very small memory

 

Welcome to the forum

 

They could also be after the active user base. Fitbit has 28m and change active users where Apple watch has 55m.

[Agrippa07]

Further to the extra users in the wearable space, I think one of the main assets will be the data that FitBit has been able to collect (Sleep, HR) which combined with other data sets can be very valuable.