Why Fitbit Shares Jumped Today

By Markets Fool.com

Image source: Fitbit.

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It's been a busy day for fitness tracker maker Fitbit (NYSE: FIT). Shares were halted briefly this morning due to extreme volatility after an SEC filing indicated that Shanghai-based ABM Capital has approached Fitbit and expressed potential interest in acquiring the company through a tender offer that values shares at $12.50. At face value, that all seems fine and dandy for investors, but the offer doesn't appear to have legs.

Here's what investors need to know.

ABM Capital doesn't appear to be real

This isn't the ABM Capital Management asset management company that's based in North Carolina that we're talking about. The ABM Capital that's referenced in the filings has no other prior filings of any type before. You can see a comprehensive list of ABM Capital's filings here (spoiler alert: the list is short).

In fact, Fitbit even told Business Insider directly that it had not actually received any communication regarding a tender offer. BI also notes that the Shanghai address that is listed for ABM Capital in the SEC database is really just shared office space.

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Nothing to see here

By the looks of it, this does not appear to be a legitimate acquisition offer for Fitbit, but is probably just an effort to manipulate share prices for a quick short-term gain. These types of filings aren't particularly difficult to create, and the SEC's position has always been that investors and companies are responsible for the accuracy of the filings. Of course, the SEC can and does pursue those that abuse its filing systems for illegitimate reasons.

While uncommon, these types of hoaxes do happen, the most recent instance being a similarly suspicious sounding acquisition offer from PTG Capital Partners that said it was looking to buy Avon Products for $18.75 per share, which proved to be bogus. The man behind that fake offer was subsequently indicted (link opens PDF).

The good news is that the market has seemingly already factored all of this in and is brushing aside this purported offer for Fitbit. Even after an initial pop on the filing, shares haven't traded anywhere near that $12.50 price today, and that skepticism is justified when you consider the circumstances.

What really matters

Instead of being distracted by fake tender offers, Fitbit will need to focus on trying to overcome its supply constraints for Flex 2, which is one reason why its guidance for the fourth quarter was so awful. Having one of its flagship products that's also one of its more affordable products miss out on the bulk of the holiday shopping season could be pretty painful, since when it comes to holiday shopping and gift giving, people aren't as likely to wait around. Leaving an "IOU a Fitbit" note in the stocking just doesn't sound like fun.

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Evan Niu, CFA has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Fitbit. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.