Key Takeaways:
Action camera maker GoPro Inc. (GPRO.O) announced a formal review of strategic alternatives including a potential sale, a move that sent its shares soaring more than 27% and puts the struggling company in play amid declining revenues.
"Over the past 24 years, GoPro has developed significant technology, IP, and brand assets along with world class product development and scaled manufacturing capabilities," said Nicholas Woodman, GoPro's founder and CEO, in a statement. "We are excited to work with our advisors to evaluate potential opportunities in various sectors to maximize shareholder value."
The announcement on May 11 followed the receipt of several unsolicited inquiries, which came after the company hired consulting firm Oliver Wyman on April 13 to explore expansion into defense and aerospace markets. The potential for a sale overshadowed weak first-quarter results, where revenue fell 26% year-over-year to $99 million and its adjusted loss widened to 35 cents per share from 12 cents a year ago.
The board's decision to explore a sale provides a potential exit for investors after years of poor performance and pivots the company's narrative from operational turnaround to acquisition value. With a market capitalization of just $224 million before the news, the strategic review will test whether suitors see untapped value in GoPro's brand and technology, even as its core business metrics continue to deteriorate.
The strategic review comes as GoPro reported another quarter of weak performance. The company's non-GAAP gross margin collapsed to 4.5% from 32.3% in the prior-year quarter, a figure that included a $24.5 million charge for component purchase commitments.
Total revenue of $99 million was down 26% from the previous year, while the subscriber count for its services dipped 8% year-over-year to 2.26 million. The company's GAAP net loss grew to $81 million from $47 million in the first quarter of the previous year. GoPro has not set a timetable for the conclusion of its evaluation and does not intend to comment further until it deems disclosure is appropriate.
This article is for informational purposes only and does not constitute investment advice.
