Fitbit (NYSE: FIT) shares moves upward by 31% following an offer from Alphabet to takeover the company.
Fitness Trackers
Fitness trackers have become popular in the last five years.
There is an increasing demand for fitness trackers as more and more people wish to track their physical health.
Fitbit is the primary producer of fitness trackers in the world.
Fitbit fitness trackers detect the owner’s daily steps to calculate distance travelled per day.
Furthermore, Fitbit fitness trackers measure physical health by monitoring heart rate as well as sleep duration.
Fitbit fitness trackers are particularly appealing to customers who wish to lose weight as these fitness trackers monitor calories burnt per day.
The Market for Fitness Trackers
The market for fitness trackers and smartwatches has been growing in the past five years.
Created through a corporate restructuring of Google, Alphabet is interested in widening its reach in the technology industry by investing in fitness trackers.
Alphabet
Alphabet (NASDAQ: GOOGL) hopes to increase its presence in the market for fitness trackers and smartwatches.
Consequently, Alphabet approached Fitbit to discuss the possibility of a takeover.
Following the offer from Alphabet to takeover Fitbit, Fitbit shares immediately surged by 31%.
According to SkyNews, Fitbit gained approximately £264m following Alphabet’s offer.
As a result, Fitbit’s value went up to £1.13 bn on Monday.
Neither Alphabet nor Fitbit announced the price Alphabet offered to takeover FitBit.
Nevertheless, even the existence of an offer from Alphabet proved sufficient to increase the market value of Fitbit.
Alphabet released its third quarter results on the same day it made an offer to takeover Fitbit.
The reports indicated a 2% fall in Alphabet’s shares.
Growth Potential
The decision to make an offer to takeover Fitbit indicates Alphabet’s trust in the growth potential of Fitbit.
The market for fitness trackers gets more and more competitive as cheap substitutes to Fitbit products become available.
Rivals from China challenge Fitbit through selling more affordable fitness trackers.
Two of Fitbit’s greatest rivals are Huawei (SHE: 002502) and Xiaomi (HKG: 1810).
Considering the increasing demand in fitness trackers and smartwatches, more companies are likely to invest in the sector.