Fri 06/19/2020 18:27 PM
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Takeaways
 
  • Korr CEO and Chief Investment Officer Kenny Orr said in a letter seen by Reorg that GoPro should engage a financial advisor to explore strategic alternatives, including pursuing a sale of the company.
  • The shareholder said in the letter that the company should eliminate its dual-class share structure, which it sees as one of the reasons the company trades at a discount.

Korr Acquisitions Group is reiterating its call to GoPro to sell itself if management cannot articulate a compelling strategy to increase shareholder value, according to a letter to the company seen by Reorg.

Korr CEO and Chief Investment Officer Kenny Orr said in the letter that GoPro should engage a financial advisor to explore strategic alternatives, including pursuing a sale of the company, noting that a “strategic buyer can help solidify and build upon your legacy.”

Korr holds an approximately 1.4% stake in GoPro, according to a source familiar with the situation.

In early March, Orr told Reorg that the fund is ready to raise its stake above 5% and nominate directors if the company fails to increase shareholder value. Orr’s comments followed the fund’s Feb. 21 letter to GoPro’s management and board seeking a new direction for the action camera manufacturer, which included the suggestion of a sale.

With a market cap of $715 million, GoPro builds cameras, software and accessories that are particularly popular for grabbing pictures and videos in extreme sport and weather conditions. GoPro generated $119 million in revenue in the first quarter of 2020, down roughly 51% from $243 million a year earlier. GoPro shares closed at $4.54 today and are up 3.2% since the start of the year.

Korr said in the letter the company has taken steps in the right direction since its last missive in February, noting improvements such as the shift to selling more products directly to consumers via its website and its record sales for the four-day Memorial Day weekend.

The company’s website brought in a record percentage of revenue in the 2020 first quarter, accounting for 17%, up from 11% in the first quarter of 2019, according to its earnings report.

Korr challenged the company to show a plan that would generate greater value than a sale to a strategic player in order to “be silent” on other issues it sees with the company on the corporate governance front.

In particular, the shareholder said in the letter that the company should eliminate its dual-class share structure, which it sees as one of the reasons the company trades at a discount. In conjunction with concerns of the dual-class structure, the letter asks that the board and CEO Nicholas Woodman provide investigations or analyses that support a reason for maintaining the share structure.

Woodman holds roughly 69% of the outstanding voting power, according to regulatory filings.

Korr notes that with a recent strategy shift, the company may be worth more than its initial $10 to $15 per share estimate.

GoPro declined to comment.

--Darcy Reddan
 
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