What City says Fitbug is worth

Wearable fitness devices firm Fitbug experienced one of the most dramatic share price rallies AIM has ever seen. Trading at just 0.375p in October, it topped out at 26.5p last month after signing retail agreements with Target and Sainsbury's, then another deal with Samsung. But with no recent sales data and the company losing money, valuing the business is tricky. A share placing today tells us what some City investors are prepared to pay.

Fitbug has just raised £3.5 million before costs at a placing price of 9p, a 15% discount to the previous day's closing price. The money will bankroll a big sales and marketing push both for digital coaching product Kiqplan, which will launch two new plans each month, and the company’s wearable device Orb.

"The business continues to gain momentum in a large and rapidly growing market place," said chairman Fergus Kee. "The successful fundraising will enable the company to build on its recent commercial and operational success to invest and accelerate our growth plans."

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Unfortunately for chief executive Malcolm Fried, he will not be around to see it. After less than eight months helping with strategy and identifying commercial markets, he’ll step down at the end of the year. Kee will move back into his previous position as executive chairman, while founder Paul Landau remains in charge of Fitbug Limited, the main operating company.

In addition, Kifin Limited has decided to convert £500,000 of loan notes into shares at 1.5p per share, part of an original £1 million loan made to Fitbug in 2012. And bosses have been handed millions of share options at an exercise price of 9p. They can cash them in over three years in equal tranches.

As we've said before, it's hard to value a business which has gone through significant change and could be about to generate significant growth. How much growth, we just don't know. Competition in the wearable fitness device market is fierce, and we're unlikely to find out how Fitbug is faring until after the crucial Christmas period.

 This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.