One of the more interesting pieces of information that was revealed late Friday, was that wearables name Fitbit (FIT) is attempting to get into the ventilator market. The company will reportedly submit its technology for lower-cost ventilators to the FDA under the Emergency Use Authorization. If it gets approval, the company plans to utilize an existing vendor in Taiwan for production. You've got to hand it to the company form jumping into the Covid-19 fray.
FIT has certainly been off the radar for many months, following the November announcement of a deal with Alphabet (GOOGL) to acquire the company for $2.1 billion or $7.35/share. More than six months later, FIT trades at an 11% discount to the deal price, and with each passing day, I still wonder whether that deal will ever actually get done.
There's certainly been some noise about the transaction from watchdog groups. Last week, European consumer group BEUC announced its opposition to the transaction in a nutshell because it would allow Google to have access to too much information, increasing the power of a small number of large technology companies. These comments come as Google briefs European Union antitrust regulators about the deal.
There are still hurdles in the U.S. In early April, the Department of Justice began a "second request review" into the deal, which may indicate that it is under additional scrutiny. Keep in mind that was five months after the deal was initially announced. In addition, the DOJ is also investigating Google for anti-competitive behavior, which Attorney General William Barr told the Wall Street Journal on March 23rd would be concluded by early summer. It is doubtful whether a decision on the Fitbit-Google deal would be done until then.
If the deal is scuttled by the DOJ, which it certainly could be, FIT is entitled to a $250 million breakup fee. The company currently sits on about $425 million, or $1.60 per share in cash and marketable securities. While the breakup fee would nicely increase the company's liquid resources, if the deal falls through, the stock will likely tank. Post-deal announcement results have been lackluster. The first quarter loss of 24 cents/share, missed the 16-cent loss consensus, while fourth quarter 2019 results were also below consensus.
Prior to the November deal announcement, shares were languishing below $4, and breached $3 in August. I suspect FIT might see those levels again, and perhaps lower if the deal falls through.
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