The placing has raised £665,000 (before expenses) following 26.6m new ordinary shares being issued in the company at 2.5p each, with a further £350,000 being raised by way of subscription from NW1 investments, which is subscribing for 14m new ordinary shares at 2.5p per share.

Furthermore, a new £650,000 convertible loan note has been agreed with NW1 Investments which is repayable by 31 July 2017, while Fitbug has also agreed a loan restructuring which extends the term on main loans until 31 July 2017. Significantly, this restructuring reduces the future interest rate payable by around 40% and this should mean that Fitbug pays around £300,000 less in interest charges than was previously planned in the current year.

Altogether, the above actions have raised around £1.665m and Fitbug is planning on using the additional capital to support marketing and channel development both in the UK and in the US. The funds will also be used to further enhance its product line-up, with development of Kiqplan Version 2 being a key priority for the company.

In addition to the above changes, Fitbug has also released an update on recent trading. Overall, the company seems to be making encouraging progress, with additional orders being made by Sainsbury’s (which has placed a replenishment order for £265,000 in the last month) and from Towers Watson, with whom Fitbug recently announced a partnership. That order is worth £275,000 and, with Sam’s Club agreeing to a 25 store, eight week trial of Fitbug Orb, Wow and Kiqplan bundle from next month, as well as Argos agreeing to include Fitbug Orb and Kiqplan in their Autumn/Winter catalogue, the company’s sales potential appears to be relatively bright.

Looking further ahead, Fitbug appears ready to take a slice of the growing wearable technology market. It expects total sales across the globe for wearable technology (all brands) to reach 148m per annum in 2018, which indicates that while they may not be a hugely popular product at the present time, there appears to be significant growth potential in the industry in which Fitbug operates. And, with consumers becoming increasingly health conscious, Fitbug’s products could benefit from rising demand for wearable technology and a desire for people to learn more about their exercise and other health factors.

Of course, Fitbug remains a relatively small company which has seen its losses widen during the last four years. And, while today’s additional capital raising (and interest saving) should help it to bolster its marketing campaign and product development, it remains a relatively high risk investment. As a result, and while it clearly has considerable future potential resulting from the forecast growth rate for Smartwatches over the next few years, Fitbug may only be of interest to less risk averse investors who can live with a volatile share price that has reached a high of almost 10p and a low of less than 3p in 2015.

The post Why Fitbug Holdings PLC Slumped 30% Today appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Sainsbury (J). The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

The marketing plan could prove to be highly significant for Fitbug, since it is aiming to take advantage of a potential surge in demand from people wishing to improve their health and wellbeing as part of a New Year’s resolution.

In addition, another other US retailer, Target, has also agreed a January marketing plan to promote both the Orb wearable device and Kiqplan propositions, which will feature digital marketing as well as in-store support. Meanwhile, Bestbuy.com will also begin to sell Fitbug’s Kiqplan and Orb products as part of its wearable range from January onwards.

Positive News

The updated deal between Amazon and Fitbug is perhaps the most important, since it means that the latter’s products are available to arguably the widest possible audience. Furthermore, the agreement of the marketing plan with Amazon will scale up Fitbug’s offering and, as a result, Fitbug expects it to positively impact sales moving forward, which is perhaps the main reason why the company’s share price is showing such strength today.

Looking Ahead

Clearly, today’s news has significantly shifted investor sentiment in Fitbug following a brief period where the market appeared to cool in its view of the company’s future. As such, Fitbug’s share price is still around half of the level it was as recently as one month ago, which indicates just how volatile shares in the health and wellbeing company can be.

Of course, such volatility is to be expected, since Fitbug is very much at the beginning of its journey as a business. While today’s updated deal with Amazon is undoubtedly hugely positive for the company, it now brings even more expectation regarding the delivery of sales. In other words, impressive sales numbers now appear to be priced in to Fitbug’s valuation and, if they do disappoint in the New Year and fewer people turn to Fitbug’s products than expected, then sentiment in the stock could decline considerably.

So, while today’s updated deal with Amazon (and new agreements with Bestbuy.com and Target) are great for Fitbug, it may be worth waiting to see whether the company can now deliver on its potential before buying a slice of it. After all, the next few months are crucial for the business and, with its shares being up 50% today and 1157% for the year, nothing but success seems to be priced in at the present time.

The post Fitbug Holdings PLC Surges 50% After Signing New Deal With Amazon.com, Inc appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.