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Fitbit & macro update ?3

13:05 04-Jun-20


The only thing I've seen in investment media about Fitbit lately is nonsense about its ventilators.  While I do hope these can be of use in later waves, the NEJoM data cited in the press release is now about 2 months old, and others have stepped up faster, to the point where some regions probably have an oversupply.

There are two developments that are important to Fitbit, though.  The first is that the ITC Judge has decided to cancel Markman hearings for the patent infringement suit that ensnared Fitbit and issue a decision based on the briefs alone.  The second is a Supreme Court order which has lead people who know far more about the law than I do to the opinion that Google will win its Supreme Court case against Oracle.  The two most relevant sentences from this review are:
Perhaps a majority of the Court will find that by according the jury so little deference, the CAFC in effect nullified Google’s Seventh Amendment right to a trial by jury.
and
Surely a jury verdict rendered after a trial should not be treated as “advisory only.”
I see the ventilator discussion above as evidence that Fitbit needs a prompt transaction, and I would be very happy to be wrong about the outcome of Oracle vs Google.  For those who want to get even further into the legal weeds, ZDNet has an excellent summary.  Most FIT investors should simply know that supplemental briefs on the issue are due August 7th, well before the court reconvenes in October.  Assuming deal closure by December, the 35% annualized premium to today's $6.25 price seems much better risk/reward than most of the rest of the market, and the ITC development clears the way for that to happen.

Another part of the appeal is the lack of market correlation.  The market has been sticking with its FOMC delusion, just as I said it would, but the current reality may manage to outlast or alter that.  My checks indicate that protests still have significant momentum and broad sentimental support.  Perhaps the most law-and-order oriented NYC resident I know writes:

Union Sq is a bit scary.  A lot of people with a lot of anger.  With reason for their anger.  Also a lot of people who just are trying to take advantage of the situation.  I'm not sure how many local stores are open.  Just from watching the news you can see that the corner CVS is now boarded up.  [My girlfriend's] bubble tea store, has closed.

The police need serious reform.  Yes, they have a difficult job, but the job they have is over protected from incompetence or misdeeds.  NYC and most other places in the US can't get rid of bad cops.  So far, here, neither the Mayor nor the Governor has offered any plan to reform the seriously messed up system.  A system that is broken on many levels.  In addition new police are sometimes hired based on a oral exam given by the existing police - thus resisting change.
I'll also point out that this is in no way meant as a condemnation of America.  I actually think that one of America's strengths is that there is some of hope for meaningful social changes that are just as lasting as technological ones being brought about by the pandemic.  In devices, these changes are favoring connected newcomers like Vuzix over the incumbents like UDC so far.  However, that hardly overrules either stock's lack of value pricing and the fact that extended business slow down isn't good for anyone.  In this environment, MicroVision regaining market compliance is even more suspect.

It's hard to imagine the Fed pulling the rug before the election, and ECB just followed suit.  The former has been more aggressive about throwing out the rule book, and announcements from BGC this morning and AUO last month show that the evolution and globalization of finance continues even as manufacturing prepares to localize in line with my theories.  We've been at the point where structural social change is needed for markets to really thrive without central bank stimulus for a while.  That can start from the bottom just as effectively as from the top.  My own experience indicates that average NYC police conduct is much better than most other places in the U.S.  Even so, the NYC experience is still FAR worse than most of Europe, where police often actually seem like civil servants.  I think most Americans who haven't traveled don't even have sense of how much better it could and should be from a practical standpoint.  However the pandemic has exposed Europe's weakness and to overcome that it needs to start moving past regional differences and valuing mobility over stability.  Otherwise, it risks equally horrific outcomes via corporate and social apathy and the inaction they bring. 

My own hope is that the American protests will be able to transition from random violence toward more focused pressure on Congress, states and municipalities to tear down qualified immunity, amongst other changes.  Police should be held to at least the same standard as other citizens.  They deserve to be honored for risking their safety in pursuit of a difficult job.  That risk should include legal safety even more than the physical kind.  To the extent that it doesn't, they are not really pursuing the job most of us want them to do.  Act and communicate safely, and with purpose, everyone.