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GoPro Inc (NASDAQ:GPRO)’s Free Fall Continues

Written by on October 15, 2014

It cannot be a good sign of investor confidence when the stock slides significantly after the company launches product improvements and that’s exactly what has happened with GoPro Inc (NASDAQ:GPRO)’s stock.

It launched a couple of cameras including a $400 Hero4Silver that includes a touch screen for the first time making it quite user-friendly. The Wall Street Journal published a mostly glowing review of the Hero4Silver model only complaining about its short 2.5 hour battery life.

While GoPro cameras are known for their ruggedness and take-anywhere quality, a $400 camera is not something that every vacationer would feel like cheap enough to lose. There is of course a $130 version GoPro which adventure lovers will feel more at ease experimenting with.

The bad news came in early October when it was revealed that the CEO Nicholas Woodman, and his wife had donated $500 million worth of shares, which were curiously exempt from IPO lock-up period restrictions.

While charity is a good thing indeed, this seems rather hurried as the normal lock-up period will be over only in end December (26th to be precise).

Out of GoPro’s 126 million outstanding shares, only 20.5 million are available for trading as of now. Even though the charity has clarified that it won’t be offloading the shares until next year, this was probably not a well advised transaction even while keeping in mind that tech entrepreneurs like Mark Zuckerberg are making forays into charity much sooner than the older generation billionaires such as Bill Gates of Warren Buffett.

GoPro shares have lost 20% just in the last five trading days and some 26% from its Oct 07 highs of $98.27. However, the stock is still up 127% overall since its IPO.

The downward spiral of the stock is being driven by a raging debate among investors and analysts about whether the company is simply a consumer electronics company or a content company as Mr. Woodman would like to make it out to be.

There are any number of electronics companies such as Sony who can come up with cameras to compete with GoPro. Tech giants such as Apple and Google probably don’t consider this niche market to be important enough to venture into or worth fighting for.

In another bout of bad luck for the company, a journalist appeared to link legendary F1 driver Michael Schumacher’s head injury to his use of a GoPro camera. While he has since clarified that Mr. Schumacher’s son did not actually make any such suggestion, the damage may well have been done leading to a sudden fall in the stock price.

The stock surely recovered from that blip but the real test will come when the lock-up period is over. Even before that, the financial picture will be clearer when the company announces its 3Q2014 results on October 30.