What’s the goal of going public again? To raise money for the company to invest in its future. GoPro just blew it and at this point I’d rather be short than long GoPro as it goes vertical on its IPO here today. Let me explain why.
First off, there’s the the Facebook IPO vs Twitter IPO analysis to apply here. I’ve long explained to anyone who cares that the point of the IPO is for the company to maximize how much money it raises for shareholders, which is what the whole point of going public actually is, right? To raise money for the company to be more financially flexible and to be able to invest in the future.
Facebook, as I’ve written many times, nailed the IPO process, as they got every last possible dime out of the Wall Street IPO machine to bolster the balance sheet and set the company on a long-term course of success. $FB subsequently crashed nearly 50% after the IPO, which everybody called a “disaster” but which gave me and anybody who was paying attention a great opportunity to buy the shares after the company had sold them to Wall Street at a much higher valuation.
Twitter’s IPO, on the other hand, was called a “success” because the stock spiked when it came public, which to me meant that the company had left $2 billion of shareholder cash on the table.
This GoPro IPO action and how it has been handled and priced is all wrong for shareholders. I even heard the CEO of the company on CNBC explain the $24 IPO pricing by saying he wanted to “share the wealth.” Uh, Mr. SurferDudeCEO, that’s not YOUR Money to share. It’s your shareholders money and they don’t want to let some well-connected fund managers take that money and put it in their pocket flipping the stock they got on the IPO. Which is exactly what is happening today.
Secondly, the valuation of this thing now that it’s popped another 35% over its IPO price, is a whopping $4 billion. Meanwhile, the company’s admitted that they are pivoting to become less of a hardware company and more of a media company. So you’re betting on a business model that they haven’t even developed yet, much less successfully employed. I don’t like speculating on a management that’s not yet even proven themselves fully in one business to successfully pivot into another business. And again, it doesn’t bolster confidence seeing how these guys didn’t even understand how to maximize the value of their IPO for shareholders.
Thirdly, GoPro is a low margin hardware gadget dealer — it’s not a platform (think iOS, Windows, Android, Twitter, Facebook, YouTube, etc). To be sure, I own and use GoPro cameras. I’ve even built a custom-GoPro camera holder for my Great Pyrenese’s dog caller and we have a blast watching a dog’s POV provided by the GoPro cameras. If GoPro were a platform instead of just a camera hardware vendor with a popular youtube channel, there might be something more sustainable and investable long-term. GoPro is cool, but it’s not a platform.
Finally, there’s just too much hype and momentum-loving going on around the GPRO right here right now.
I’m not out there trying to borrow any GoPro shares to short today. But I do think that if this stock gets up above $40 in the near-term, I would look to try to short some. And I’ll probably take a stab at buying some longer-dated, out-of-the-money puts if the stock is still up here giving this stock a $4 billion valuation in a month or two. I always enjoy reading the other side of my analysis, so if you disagree and think that $GPRO is a screaming buy here in the mid $30s, let me know in the comments below.