SHARE PROPHET TALKING SENSE21 Jan 2017 18:07
Just an article that everyone except the rampers already know
If it wasn’t for the fact that ordinary PIs will have lost a lot of money, the announcements and share price movements in Fitbug Holdings (FITB) over the last couple of days would almost be comical!
The company makes an awful looking, budget, ‘activity tracker’, called the Orb, which sells for around £32 and seems to be a clearance item on many of the sites that I checked, and since the shares hit around 26p towards the end of 2014 on a load of hype it has been in a downwards spiral. I can still remember getting a load of abuse on the bulletin boards for having the audacity at the time to suggest that it was valued at a ridiculously high level and was an obvious sell in the mid-teens and higher – which wasn’t what the pump and dump merchants wanted to hear at the time!
Since then its share price had slipped to around the 0.17p level – that was until it released news that it had secured an initial one year ‘wellness programme’ with a financial services group in Asia to provide 14,000 devices along with ongoing corporate wellness services, but exact details were very scant. This caused a rise of over 400% at one point and the shares were trading at around 0.77p just prior to a suspension from trading, which led to all sorts of speculation on the boards about what news was coming.
But as it turned out, the subsequent update had me checking my calendar to make sure that it wasn’t in fact April Fools Day!
The update clarified that in fact Orbs will generate ‘low margins’ from corporate customers and that this new contract will generate a massive £60,000 in service revenue for the whole of 2017. Now that alone hardly seems to warrant the rise that we saw, but when taken alongside the expected losses that the company will have made during 2016, I couldn’t believe that PIs actually carried on buying initially before they woke up to the facts and the share price crashed by over 50% to close at 0.4p on the ask.
Given that the company is expecting pre-tax losses for 2016 to be in the region of £3.25 million, the revenue from this new contract is a mere drop in the ocean.
Back in July it restructured its balance sheet by converting £8.4 million of outstanding debt into shares – leaving around £740k of debt remaining which is payable more than a year from then – and at the same time raised £2.6 million via an equity issue. Prior to that it only had £65,000 in the bank, so assuming that it has burnt through a further £1.6 million or so since the interims up to the end of June, I would expect that it will run out of cash again by around March/April. The trading update pretty much suggests fundraising is coming imminently by mentioning that the company is ‘mindful of funding needs’.
The update mentions that the company has switched its focus to the co
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