GoPro Is on the Brink and Has ‘Substantial Doubt’ About its Survival
Less than a month ago, GoPro said it was reviewing its strategic options, including considering a potential sale or merger. This week, GoPro warned in financial filings that it risks being unable to continue as a going concern and is seeking help to avoid a default.
As Bloomberg reports, California-based GoPro reported a 26% drop in revenue in the first quarter of this fiscal year. GoPro announced plans to lay off about 23% of its workforce in April.
GoPro also filed an 8-K with the United States Securities and Exchange Commission (SEC), in which GoPro says “there is substantial doubt about the Company’s ability to continue as a going concern.”
The company says it expects to “continue to incur operating losses and negative operating cash flows.”
In response to the news, GoPro’s share price dropped as much as 14% on Monday, June 1. It is up 7.3% today and 87% in the past year. However, in the past five years, GoPro’s share price has fallen 89%. In GoPro’s history as a public company, its max share price neared $80. It is $1.18 as of writing.
When GoPro went public in June 2014, it opened at $24 per share and closed that day at $31.34, valuing the company at nearly $4 billion. It is now valued at $200 million.
GoPro has explained its challenges as the result of massive increases in memory prices, which is undoubtedly true. The global AI boom has sent memory prices skyrocketing, and all tech companies are struggling as a result.
However, GoPro has also been facing stiff competition from Chinese technology companies like DJI and Insta360 in recent years, both of which have swiped significant market share from GoPro in the action camera segment.
GoPro recently unveiled its brand-new Mission 1 series cameras, and they do look impressive. They feature an all-new GP3 processor and boast improved image quality.
However, GoPro is dealing with financial problems now, and any potential revenue boost from the Mission 1 series cameras has not yet been fully realized. Unfortunately, the memory shortage has also reduced GoPro’s forecasted sales. GoPro says it doesn’t expect to have sufficient liquidity to satisfy several of its loan covenants and debt obligations.
GoPro is reportedly working with advisors to evaluate its options, including a potential sale or merger, or entering new market segments like defense and aerospace. At this point, nearly every possibility is on the table, as GoPro is at significant risk of defaulting on its loans. Make no mistake, GoPro is on the brink of failure.
Image credits: GoPro. Header image created using an asset licensed via Depositphotos.com.
