Foxconn Divests in GoPro: Will New Products Help GoPro Flourish?
Foxconn reduced its stake to 6%
Foxconn is a Taiwanese contract manufacturer. It announced that it sold off 30% of its stake in GoPro (GPRO). Foxconn lost 73.0% of its share price YoY (year-over-year). The company was concerned about GoPro’s growth potential, its implied value, and cutthroat competition.
In 2012, Foxconn bought around 8.9% stake in GoPro at $17.1 per share with an investment of $200 million. In 2014, when GoPro raised an IPO (initial public offering) and went public, Foxconn laid off 1.4 million shares with the gain of $63 million. This year, it sold 2.2 million shares. As expected, it generated a lower profit of $7.4 million. Currently, it holds 6% stake in the company.
Does GoPro raise concerns for Foxconn?
Foxconn invested in GoPro to reduce its dependency on Apple. Foxconn generates around 40%–50% of its revenue from Apple. Since Apple intends to keep the secrecy for its products, Foxconn built a separate unit that’s solely kept to manufacture Apple’s products. Considering the dependency between the two firms, any global factors that impact Apple will also impact Foxconn to some extent.
To reduce the mutual impact, Foxconn diversified itself by selling hardware gear and electronic gadgets like Bluetooth headsets and other mobile accessories. Apart from GoPro, it also invested in forked Android Developer Cyanogen and Indian e-commerce site Snapdeal.
Foxconn’s divestment in GoPro could be taking profit from other businesses. If we look at other companies like Vanguard Group, it increased it stake by 29% to 4.9 million shares in GoPro. In contrast, Blackrock and American Century increased their stake to 3.0 million and 2.0 million, respectively, on September 30.
The iShares Russell Mid-Cap ETF (IWR) is a portfolio of 834 stocks. Intuit (INTU), Twitter (TWTR), Fitbit (FIT), and GoPro account for 0.43%, 0.27%, 0.3%, and 0.04% of IWR, respectively.
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