Big Red Car here n what is shaping up to be a great day here in the ATX.
Well, only if you think 70F and sunny is a good thing. Yes, sayeth the Big Red Car. Sunscreen?
Today, in the cross hairs is GoPro. Not because the Big Red Car has any angst toward the company but because it demonstrates some interesting stuff.
You know GoPro, the camera you strap to your helmet while skiing and get those great videos of flying through the trees and powder until the big collision with that aspen tree. Still, it looks great!
Read on, dear reader. I’ll be videoing you as you read. Haha.
GoPro was a darling stock when it came public at $24 and shot up to almost $100. Big mo! Not so much recently. [Down in the $11 range today. Ouch.]
So what happened, Big Red Car?
First thing, dear reader, is that GoPro blew through its innovation leadership phase and other people caught up. This is the lot of success — you get noticed, you get copied, you attract attention and attention creates competition and competition means you have to get your jock on and compete. [Bit crude, Big Red Car.]
So what really happened?
Here’s what really happened:
1. An entire camera industry niche was created almost over night — “action” cameras.
GoPro owned it, at first. Now there is a lot of competition. They were the innovation and market leaders.
But, when you’re leading the pack, you have to outrun the pack. Every day. Ask APPL about that, no?
2. GoPro was an innovation leader and then it became a laggard.
No 360 degree panoramic offering. No drone offering though it can be mounted to somebody else’s drone (not a fatal flaw).
Others have these capabilities, not GoPro. Yet.
3. The company thought it didn’t have to spend on advertising and could rely on social media word of mouth and buzz. Wrong!
They are back advertising today and are committed to a comprehensive program for all of 2016. [The Big Red Car thinks this is going to make a huge difference.]
4. The company cannibilized its own product lines without retiring its old products simultaneously. This is a very technical but understandable problem.
When you have the best action camera in the industry and introduce one that is even better, you cannibalize YOUR OWN sales. Duh. A lot of this happened.
5. The company played around with its pricing and began to cut prices to drive sales. The new cameras were too expensive.
Not a bad strategy if you had seasonal sales — like a car year — but it didn’t work. The public began to expect a better price and then the company introduced an even higher priced, more capable to be sure, camera. You have to get the pricing right.
Their high end cameras account for 50% of revenue so if you mess with them, you are rocking the entire Casbah, baby. That could be a big problem.
6. It became a Wall Street darling “tech momentum” stock just like TWTR. When they decided to stop spending on televised marketing, some say they lost their mojo.
Live by the sword, die by the sword. You lose your mojo and you are fucked.
7. The company failed to hit its earnings numbers. It released guidance that it projected a substantial decrease in sales. The numbers were good just not great.
They outran their growth story and stubbed their toe but they did not lose a limb. Right now, it feels like Wall Street thinks they lost a leg.
This happens and there is a price to pay for it. That price is now only partially evident.
8. Then there is the issue of the CEO having paid himself a jillion dollars in restricted stock, his control of 74% of all the votes through multiple classes of stock, and a secondary offering that was a conduit for insiders to sell. All things that would have been taboo in an earlier time.
Technically, this is called “the stank” and the stank on this company is not good.
Let’s be clear, the Big Red Car approves of a CEO controlling his company in any manner he can as long as the public knows it and prices it into the grand scheme. They have, apparently, done just that.
There is a call to replace the CEO — good luck with that, y’all. He controls 74% of the voting shares and he can decide who sits at his board table with complete impunity. Complete control. Bravo, sayeth the Big Red Car.
If he wants, he could put a Big Red Car on his board. Control. Absolute control. Which means he has nobody breathing down his neck. He can play polo three days a week if he wants. [You played polo recently?]
Recently — like today — there has been a bit of chatter on places like Motley Fool that an $11/share price may ber a great entry pony to ride a dead cat bounce back upward.
A good trade in the short to mid-term. Maybe so. Maybe no.
Here is that article. Is It Time to Reexamine GoPro and Jump In?
Preach, Big Red Car
The most important thing the Big Red Car wants y’all to focus on is this.
1. Even exiting a venture funded investment with an IPO is not an end all. You still have to operate the company. Your just swimming in the deep end of the ocean. Where the big sharks live.
2. When you were an industry leading innovator, if you stop innovating, the sharks will come looking for you.
3. You have to market all the time and you will pay the price if your marketing doesn’t work.
4. When you broaden your product line — a good thing — you better watch how it impacts YOUR products. Don’t compete against yourself.
5. Wall Street will castrate you if you miss your numbers.
This ain’t bean bag, baby.