The markets been throwing me for a loop with the central banker Japanese QE baton handoff and the rip roaring V rally to new ATH. However, there is one thing that I feel more confidence about than probably anything else in the market right now and that is GPRO stock is about to get decimated. GPRO went to market with an exceptionally low float . This is a timeless investment banker trick. The small amount of available shares means that if there is any demand at all the shares tend to skyrocket.
'GoPro offered 17.8 million shares at the time of its IPO. This included 8.9 million shares to raise money and another 8.9 million shares sold by existing shareholders, including the company's founders. Meanwhile, GoPro has 123 million shares outstanding, plus nearly 30 million shares in employee stock options and restricted stock.' -Forbes
Today GPRO announced a secondary raising $100M in new capital but it is mostly a guise for impatient insiders to front run the big Lockup coming in December.
'The move is designed to spread out the impact of nearly 108 million shares that could have hit the market on Dec. 22. That many shares would have raised GoPro’s current stock-market float more than eightfold. Large shareholders who participate in the offering will have to agree to a new 90-day lockup.
That may delay some pain for GoPro’s other investors, though it isn’t clear by how much. No share amounts were specified in Monday’s filing.
In an email to employees, Mr. Woodman said GoPro would raise about $100 million through the offering, which leaves $700 million under its stated maximum for company insiders to sell. With the stock trading around $76 currently, that would represent a little more than 9 million shares—less than 10% of those under lockup.' -WSJ
Using the WSJ numbers I have created a graphic to illustrate the magnitude of the supply becoming available to GPRO stock.
It's not rocket science. It is simple supply and demand. You can be the best, most profitable company in the world, an increase in supply of that magnitude will negatively impact the stock price.
GPRO is trendy and cool right now but it is what it is and right now it's a camera company trading at 65x forward earnings.
All I'm saying is that even of you are a true believer of GPRO, it may be prudent to wait until after the new supply gets digested before initiating a long position.