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Why Gogo Inc. Shares Plunged

By Steve Symington - Dec 18, 2013 at 5:13PM

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Is Gogo's drop meaningful or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Gogo (GOGO 1.01%) fell more than 15% Wednesday after the in-flight connectivity specialist announced that Ripplewood Holdings, one of its private equity sponsors, has distributed all of its 27.6 million shares of Gogo stock to its funds' limited partners.

Simultaneous with the distribution, three Ripplewood directors also resigned from the Gogo board.

So what: Ripplewood founder Timothy Collins asserted they still believe Gogo has a "bright future," while at the same time explaining that "This share distribution was made to provide our limited partners with greater flexibility to achieve liquidity." 

In addition, Gogo pointed out that, following the distribution, board member Oakleigh Thorne and entities affiliated with him will continue to own roughly 29% of all outstanding shares.

Now what: Considering the stock has risen by nearly 60% over the past three months alone, it's hard to blame Ripplewood for the distribution. But remember Thorne, for his part, stated he remains confident in Gogo's business and with his investment in the company, indicating he has no intention of selling his own shares in the near future.

As it stands, and especially considering the broader implications of Gogo's recent certification to install its online connectivity platform in Boeing's 747-400 aircraft, I think today's pullback could be a fantastic buying opportunity for long-term investors willing to wait for the company to achieve sustained profitability.

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