Shares of FitBit (FIT), the leading seller of health tracking gadgets, plunged 10% on Monday after the recently-public company said it wanted to sell 21 million more shares in a secondary offering.
FitBit, which went public in June at $20 per share, said it would sell 7 million new shares and use the proceeds for working capital. In addition, current shareholders would sell another 14 million shares. The 21 million share sale is more than 8 times the average daily trading volume of the stock recently, according to Yahoo Finance data.
The stock dropped $3.97 to $36.83 in after hours trading, after having doubled since the IPO.
FitBit had $575 million of cash and short-term securities on its balance sheet at the end of the third quarter. The company did not identify the selling shareholders. The company’s largest investors after the IPO were venture capital firms Foundry Group, True Ventures II and Softbank PrinceVille Investments.
The secondary sale will put FitBit in prime postion to make acquisitions, analysts noted. But CEO James Park said the company is not in a rush to close any deals. "We have been evaluating a lot of opportunities," Park said on a call with analysts on Monday. "But just because we have the cash doesn't mean we’ll be making any hasty decisions."
At the same time, FitBit announced solid third quarter results as sales of 4.8 million trackers, ranging from the $60 Zip to the $250 Surge, brought in total sales of $409 million and adjusted earnings per share of 24 cents. Wall Street analysts had been expecting sales of $359 million and adjusted earnings of 10 cents, according to FactSet.
The company also set expectations for the all-important holiday quarter above what analysts had forecast. FitBit said it would earn 20 cents to 25 cents on revenue of $620 million to $650 million. Analysts were expecting 20 cents and $590 million of sales, according to FactSet.
FitBit's third quarter sales likely outpaced Apple (AAPL) watch sales for the second consecutive quarter. Apple doesn't disclose exact sales of the Apple Watch but analysts estimated the company sold 3 million to 4 million last quarter. Apple brings in far more revenue, however, since its watches start at $350, more than the price of the most expensive FitBit devices.
Most of FitBit's sales were in the United States, but the strengthening dollar hit the 33% of sales from abroad. Revenue would have been about $20 million higher if the dollar had stayed constant, CFO Bill Zerella said on a call with analysts.