It has been a wild week for GoPro’s stock. Over the past five days alone, shares in GoPro, Inc. (Nasdaq: GPRO) are up more than 183%. And that’s before today’s current 10% boost in premarket trading.
First, the company’s share price was boosted after it was revealed that YouTuber Markiplier had bought an 8.5% stake earlier this summer.
Now, GoPro’s shares are surging again after the company announced it will merge with another company to refocus its business on artificial intelligence solutions. Here’s what you need to know.
What’s happening?
GoPro’s stock is surging once again in premarket trading, up more than 10% as of the time of this writing.
It’s a surge that has been ongoing since Monday. The day before, it was revealed that YouTuber and filmmaker Markiplier had become the largest individual investor in the struggling action camera maker, acquiring an 8.5% stake in July.
But on the same day that GoPro’s stock got a boost from the Markiplier news, the company announced another piece of news—and one arguably more consequential: It will merge with Starman Optical, Inc., a maker of AI hardware components.
This means it will transition from being a consumer action camera company to a company that continues to sell cameras, but also focuses on selling AI components.
Starman Optical is a privately held company that makes optical transceivers for AI data centers. These transceivers convert electronic data from CPUs and GPUs into light, which can then be transmitted over optical fibers at much higher speeds than traditional copper cables.
Optical transmission enables AI servers to communicate with one another more quickly.
Yesterday, thanks to the AI pivot, GoPro’s stock shot up more than 37% to $1.69 per share, a price it has not seen since December. And today, the company’s stock price is already up another 10% on the momentum.
What does GoPro get out of the merger?
The main thing GoPro gets out of the merger is a much-needed financial lifeline. Years of declining sales due to increased competition and more capable smartphones have taken a toll their GoPro’s bottom line—and decimated its stock price.
Over the past five years alone, GoPro shares had fallen by as much as 96% before this week’s turnaround. The company was recently sitting on $92 million in debt.
As noted by Reuters, the merger will see Starman Optical purchase a majority stake in GoPro for $285 million and repay GoPro’s $92 million in debt. In return, Starman gets a 90% stake in the company.
The merger will then see GoPro’s main business shift to focusing on providing AI components to enterprise consumers, giving the struggling action camera maker a new stream of potentially lucrative revenue.
What does Starman Optical get out of the merger?
As for Starman Optical, the privately held company benefits from access to GoPro’s catalog of more than 2,500 U.S. patents, which it can use to improve its optical transceivers and other component offerings.
By merging with GoPro, Starman Optical also becomes a publicly traded company. This is because both companies have confirmed that the merger will not result in GoPro going private.
The combined company will focus its AI component offerings on the aerospace, defense, government, and robotics markets.
As for GoPro’s consumer offerings, the company says it will still “fully support its existing consumer products and its subscription and cloud platform.”
When does the merger finalize?
While GoPro’s stock price is getting a boost this week on the merger news, the actual joining of both companies isn’t expected to happen until the end of this year.
The merger has already been approved by GoPro’s and Starman’s boards of directors, but it still needs to be approved by GoPro’s shareholders. It is also subject to regulatory approvals.