GoPro Inc (NASDAQ:GPRO) stock tanked early Monday after the company announced preliminary fourth-quarter results that disappointed the Street. The camera maker also confirmed the report of job cuts we heard about last week, but there could be even bigger changes in store for GoPro than just another round of restructuring. We’re now hearing that the company could be trying to sell itself, but would anyone buy GoPro in its current state?
GoPro said to hire JPMorgan to explore a sale
Citing sources familiar with the matter, CNBC reports that the action camera maker has hired JPMorgan Chase to help it explore the possibility of a sale. The investment bank was one of the underwriters for GoPro’s 2014 initial public offering.
According to CNBC, no sale can be assured, and it’s unclear whether anyone has made an offer to buy GoPro. Chief Executive Officer Nick Woodman told CNBC earlier today that they would consider partnering with or selling to a larger company in order to “scale GoPro even bigger,” if possible.
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However, he also said, “Of course, we need to run the business as though we’re going to be independent, and we’re planning accordingly.”
GoPro stock tanked after this morning’s negative earnings preannouncement, but after the report that the company might be seeking a buyer, the shares bounced. The company now estimates its fourth-quarter sales at about $340 million, while it previously had been expecting about $480 million in sales.
List of those that would buy GoPro may be short
GoPro’s HERO5 camera line-up significantly underperformed during the holiday quarter, and the company ended up slashing $100 off the price to generate sales. In light of the weak sales, it’s hard to imagine which companies might buy GoPro, especially since the company also said this morning that it will exit the drone business after unloading the rest of its Karma inventory.
One obvious name that has been floated before when it comes to finding buyer for GoPro is Apple. Rumors about Apple deciding to buy GoPro have circulated since at least 2015, even appearing as recently as February 2017. Apple would certainly have the cash to buy GoPro this year, especially if it repatriates a massive chunk of the cash hoard it has overseas, as most analysts generally expect it to do.
An interesting idea would be Snap, which has been trying to paint itself as a camera company rather than a social media firm, but it has been struggling at least as much as GoPro, if not more so. It also doesn’t have the cash to make an acquisition and probably won’t anytime soon. Analysts with GBH Insights estimate that tech firms could repatriate as much as $400 billion in cash this year, so any U.S. firm with a large pile of cash stashed overseas would be able to buy GoPro.
Even though GoPro is exiting the drone business, drone makers such as DJI might be interested in the company purely for its cameras, which could be packaged with their drones. It’s still early, but you can bet we’ll start seeing analysts weigh in on companies that might buy GoPro by issuing their own lists of suggestions.
Short-sellers raked in millions on GoPro stock
It’s been a volatile day for GoPro stock, which was off by 30% before this buyout rumor, giving short-sellers reason to rejoice.
Data from financial analytics firm S3 Partners indicates that GoPro is the fourth-biggest short in the consumer electronics sector, according to managing director Ihor Dusaniwsky. He said this morning that short-sellers were slashing their exposure to the company before the holiday season. Short interest averaged $269 million, according to S3 data, and it peaked at $361 million on Nov. 1. Dusaniwsky said that since then, short interest in GoPro is down by more than one-third at $234 million.
Short-sellers had raked in $45.4 million in mark-to-market profits before the report that the company may be trying to find a buyer.