Fitbit reported quarterly earnings that beat analysts' expectations on Monday. But shares plunged — and continued to drop Tuesday — after the company announced that "certain stockholders" are proposing to sell 14 million shares in a follow-up public offering.
The wearables company reported third-quarter earnings of 24 cents per share on $409 million in revenue. Wall Street had expected the company to deliver 10 cents per share on $352 million in revenue, according to consensus estimates from Thomson Reuters.
Shares, however, fell more than 8 percent in extended-hours trade on Monday, and were down more than 6 percent Tuesday morning.
Fitbit said on Monday that it intends to do a follow-on public offering of a proposed 7 million shares of its common stock, while certain shareholders were proposing another 14 million shares. The company also agreed to an early release of lockup restrictions on about 10 percent of its outstanding shares.
The company said the release of the lockup of 2.3 million shares would be effective Nov. 4.
"There's going to be a lockup expiration in mid-December anyway, so the plan for this offering that we just announced is to provide a really orderly and soft landing as we transition from venture capital shareholders to public investors," CEO James Park told CNBC's "Squawk on the Street" Tuesday.
"The benefits of the offering is that the largest shareholders in the company are going to be re-locked up for another 90 days, so I think that is a key point," he added.