The main problem with unicorn companies is that no one knows their real value and whether they are capable of providing safe long-term investment portfolios. GoPro, the leading action camera manufacturer which went public in 2014, has long been trading below their share price and their sales performance hasn’t been strong. Are we about to witness another unicorn fail?
When GoPro entered the market as a promising startup, the company's aim was to bring a compact filming solution to become popular among social media junkies and those leading an active lifestyle. The idea seemed to have had potential as self-driven millennials and sports enthusiasts warmly welcomed waterproof smart cameras. Whether it was bad karma from launching an IPO or better product offers from the rivals, GoPro is now sinking, having lost 52% of their share value in one year, according to Bloomberg data.
GoPro made quite a few mistakes with their strategy execution and these received an immediate market response. When in 2015 GoPro released their Hero 4 Session, the company struggled to get the price tag right, changing it twice shortly after release. The Session entered the market at $399, but GoPro's better-equipped Hero 4 Silver was trading at the same price. After acknowledging the mistake, GoPro dropped the price to $299, but it was already too late for the camera to meet sales and customer demand. Shortly after the first price drop, the company's Founder and CEO Nick Woodman stated the camera was selling according to the company's expectations. However, considering that the price was then further decreased to $199, there was no way the company could hit their revenue target at that time.
As a result, GoPro had a weak Q3'15 performance falling $19 million short of their projections due to the Session Hero 4 price drop and scared shareholders. Woodman admitted that it was, indeed, a difficult quarter to do business. The Hero 4 mistake, however, didn't seem to be the end of the world at that time as there was a plan to catch up on the revenue with GoPro's first foldable drone - GoPro Karma.
Days after GoPro Karma was released, customers started reporting that their drones were falling from the sky. At the same time the established Chinese drone maker DJI released their more sophisticated Mavic Pro, for around the same price but with better specs. Whilst the idea itself - to incorporate GoPro's waterproof camera with the user-friendly drone - was promising, the company overlooked risks associated with drones - they are not 'fault tolerant' and a thorough beta testing is critical. Instead, they 'rightfully' but 'mistakenly' pushed for filming and stabilization capabilities, which make little sense if the drone crashes. While everyone was engaged in the news about the US elections, GoPro launched a recall program of their faulty gadgets, hoping to fix the issue and get them back to market quickly.
One of the problems with GoPro is that even though they have creativity and hunger for innovation, they repeatedly fail to execute because they rush it. In 2014, the launch of their IPO wasn't a necessary move as the company had more than enough cash reserves to operate the business, in addition to having no problems with private investment. So, even though GoPro traded well above their share price in the weeks after going public, once the dust settled, the market toughened and cooled down.
In regards to drones, the more experienced DJI and other drone makers have been through the same issues with their early prototypes but thrived once they learned from their mistakes. However, when GoPro entered the uncharted territory of the drone market with a faulty device, the company itself eliminated their chance to compete. Colin Snow, the CEO of Skylogic Research refers to the situation: ‘The problem for GoPro is that they are still learning, while the competition has grown up.'