This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Why Did GoPro Go Public Now? Think Christmas Lockup Expiration

NEW YORK (TheStreet) -- The hottest topic on the market today is GoPro's (GPRO - Get Report) initial public offering.

After the stock skyrocketed 31% on its first day to close at $31.34, shares hit an intraday high of $40.47 on the second day of trading. On Monday, shares closed at $40.55. The stock closed Tuesday at $48.80, representing 103% jump from GoPro's high-end initial offering of $24 per share. Shares are currently around $43.70.

Calling this a successful IPO would be a gross understatement. It was picture-perfect. But investors are getting carried away. This is not likely to end well.

>>JPMorgan Should Revisit Splitting Dimon's Chairman and CEO Role

While GoPro does hold a strong 45% share in its core action-camera market, the company has done little to deserve its $6 billion market cap. At around $48 per share, the stock is trading at 98 times 2013 earnings. There's no justification for this -- not when 2013 margins fell 6.5% to 36.7%.

The 103% gains in a span of just four trading sessions can only be defined as irrational exuberance. As soon as logic returns to this stock fair value will point to around $30 per share, suggesting a decline of roughly 40% from Tuesday's close.

Retail investors are betting too much and underestimating potential threats from (among others) Samsung (SSNLF) and Sony (SNE) -- two larger rivals that have underinvested in this area. When they change their minds, GoPro's earnings won't be able to match current expectations. These same investors who are betting on management to pivot quickly towards a media strategy will be the ones left holding the bag. It won't be a pretty picture.

For that matter, retail investors should not underestimate the timing of GoPro's IPO. I don't think it was by accident that it was scheduled for June 26. Why not wait for July 7 after the July 4 holiday passes? In my opinion this would have made more sense. But why waste an opportunity to capitalize on retail ignorance?

An email sent to GoPro's representatives requesting clarity on the IPO scheduling was not immediately returned. But here's my take -- there's this thing called "lockup expiration."

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
GPRO $12.23 0.00%
AAPL $93.64 0.00%
FB $118.57 0.00%
GOOG $698.21 0.00%
TSLA $241.80 0.00%


Chart of I:DJI
DOW 17,891.16 +117.52 0.66%
S&P 500 2,081.43 +16.13 0.78%
NASDAQ 4,817.5940 +42.2360 0.88%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs