Financial Institutions and Markets

Published: 2021-09-11 05:30:09
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Discussion Lesson 1Financial Institutions and Markets Discussion Lesson 1Question 1:First choose a recent IPO (within the last two years), research and discuss the success of the IPO, including the initial price offering and the subsequent stock prices.Answer:The wearable technology company, Fitbit valued at $4.1 billion has raised astonishing $731 million for its IPO in June, 2015. Despite a competitive market with strong participants as Huawei’s TalkBand and the Apple watch, Fitbit that has offered $20 for its share, has opened at $30.40 that is 52 percent above the asking price (Quittner, 2015).  July, the second trading month has still been successful for Fitbit as its share price has climbed up to $47.60. James Park, the CEO of Fitbit, sounded promising to company’s shareholders when he stated that there is over $200 billion of consumer spending on health and fitness and as such this massive market can handle more than one dominant player. (Imbert, 2015).  Yet, believes of Mr. Imbert were not fulfilled as of today, Fitbit is trading at $6.24. So what has caused such a dramatic fall in performance over the period of 2 years and a change from the success story into a failure?  It is stated that Fitbit has critically increased its spending on R&D to keep up the impressive growth rate and launch wider range of products (Green, 2017). This move has dramatically knocked down profitability of the start-up and has significantly declined its earnings. As a result, the revenues of the company were not growing fast enough to balance up and sustain the massive increase in spending. This circumstance is a primarily reason that explains the disappointment of investors and a poor position of Fitbit as of today.

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