Jawbone value drops by more than half on new equity raising
Test of market shows retreat in worth of some private tech groups
Jawbone, the struggling maker of fitness tracking devices, revealed on Friday that it had shored up its finances with $165m in new equity, though at less than half the $3.3bn valuation of its previous investment round.
The funding is one of the first public confirmations of a sharp retreat in the values of some private tech companies, even as it boosts Jawbone’s own chances of surviving a downdraft that has hit the private markets.
“The ripple effects are going to be felt throughout the private companies, there’s going to be a lot of resetting,” Hosain Rahman, chief executive, said in an interview with the FT.
While suffering from the waning appetite for so-called unicorns, or private companies worth more than $1bn, Jawbone has also struggled to set itself apart in a “wearables” market awash with devices that often do little more than track steps.
The prospect that the red-hot private market will suddenly cool has prompted fears that many tech companies will find it hard to retain workers. Employees lack the protections for their personal stock that venture capitalists and others are given, leaving them particularly exposed to a decline.
Mr Rahman said Jawbone’s investors had agreed to what he called an “unprecedented” compensation arrangement for the company’s workers, giving them extra stock to make up for the dilution in their shares that would otherwise have come from the new round.
They will still suffer from the slump in Jawbone’s value, which has taken it from $3.3bn to only $1.5bn, but will not experience the kind of extra hit seen by employees at companies like Good Technology.
Some shareholders in the mobile technology company sued after the company was sold to BlackBerry at a knockdown price last year, leaving ordinary shareholders, including employees, with less than 10 per cent of the proceeds of the sale.
Jawbone, meanwhile, is betting that a new family of products this year will help it win back market share in fitness trackers, as users look for more reliable devices capable of accurately measuring important health indicators like heart rate. Mr Rahman said the move deeper into tracking vital health signs will make 2016 “the year of accuracy” and benefit companies like Jawbone that have invested in more advanced sensors and other technology.
The private company, which has now raised around $1bn in its life, is also looking to monetise its intellectual property through the courts, having sued publicly traded rival Fitbit last year. It has “a war chest of 2,800 IP assets in the space”, said Mr Rahman, though he refused to say whether it was planning a wider legal campaign against other wearables makers.
Jawbone’s patents have already helped to underpin its finances, enabling it to raise $250m last year in a convertible note from mutual fund BlackRock that was secured on the company’s intellectual property.