GoPro (NASDAQ:GPRO) is tapping institutional investors for a new round of capital raising. The company announced Thursday that it is floating $100 million worth of convertible senior notes in a private placement.
The notes mature on Nov. 15, 2025, assuming they're not converted. As is typical with convertible securities, investors can opt to transform them into shares of the company, in this case GoPro's Class A common stock. The company has not determined the terms and rates of the conversion, nor has it fixed an interest rate for the notes. It promised that these details will be determined when the notes are priced.
GoPro did not get overly specific about what it plans to do with the proceeds. It said it will channel some of the monies to anti-dilution measures in order to mitigate the inflow of new shares due to conversion. It will also devote funds to "general corporate purposes," among which are debt retirement and potential acquisitions or strategic investments.
The company's announcement of the new financing comes less than two weeks after it released very encouraging fiscal third-quarter results. Revenue and net profit came in well above analyst expectations, as did guidance.
It seems GoPro's strategy of reducing dependence on pure hardware sales is working, with significant uptake in its subscription service. Meanwhile, sales of its first-person action cameras continue to do well regardless of this strategy, particularly with higher-end models.
Yet investors seem spooked about the company's need for capital, and the potential for this issue to dilute the value of their investment. On Thursday, GoPro's share price slid by nearly 14%, against the gain of the S&P 500 index.