Shares of GoPro (NASDAQ:GPRO) plunged nearly 70% over the past year due to concerns about the action camera maker's valuation, competition, and growth potential. Therefore, it wasn't surprising when GoPro's top investor, Taiwanese contract manufacturer Foxconn, recently disclosed that it had sold 30% of its stake in the company.

Three years ago, Foxconn bought a 8.88% stake in GoPro at $17.08 per share. That $200 million investment valued the start-up at $2.25 billion. After GoPro's IPO last year, Foxconn sold 1.35 million shares for a profit of $63 million. This year, it sold another 2.15 million shares for a much smaller profit of $7.43 million. Those sales have whittled down Foxconn's stake to just 6%. Should GoPro investors be concerned about Foxconn's waning interest in the company, or is Foxconn simply taking profits for other business reasons?

Image source: GoPro.

The relationship between Foxconn and GoPro
Foxconn CEO Terry Gou noticed GoPro's cameras after seeing scuba divers use them on a diving trip. After Gou invested Foxconn's money into the action camera maker, many analysts assumed GoPro would strike a contract manufacturing deal with Foxconn.

Woodman initially told Bloomberg that the two companies had "a shared vision of the future". However, subsequent reports indicated that Gou and Woodman weren't on the same page, and insiders claimed Gou "became convinced that he had overpaid for his shares." That's probably why Gou didn't take a seat on GoPro's board or sign any manufacturing deals with the company. Meanwhile, GoPro signed manufacturing deals with smaller companies like Taiwan's Chicony Electronics.

Shortly after GoPro's IPO, Foxconn claimed it would "work with GoPro to realize the shared vision of giving consumers a rich viewing experience through advanced hardware, software and content development tools." GoPro has upgraded all three categories since its IPO, but it's unclear how much input actually came from Foxconn.

Decreasing its dependence on Apple
Foxconn generates 40% to 50% of its revenue from a single customer: Apple. To meet Apple's strict demands for secrecy, Foxconn builds entire factories to exclusively manufacture Apple products. This symbiotic relationship leaves Foxconn very vulnerable to any fluctuations in global demand for Apple products. Looking ahead, some analysts doubt iPhone shipments can keep growing on a year-over-year basis. If that growth stalls out, so could Foxconn's revenues.

To decrease its dependence on Apple, Foxconn has started selling first-party consumer electronics like Candyard Bluetooth headsets and Coverbank mobile accessories. It also licensed Nokia's brand and design for its N1 tablet and worked with Mozilla to launch Firefox OS phones and tablets.

Another part of this diversification strategy is to invest in promising companies like GoPro. Earlier this year, Foxconn invested in forked Android developer Cyanogen and Indian e-commerce site Snapdeal.

Should GoPro investors be worried?
Foxconn's GoPro stock sales are noteworthy, but we shouldn't jump to conclusions before checking out other institutional and insider sales.

GoPro's four biggest institutional investors all increased their stakes in the company in the quarter ending on Sept. 30. Vanguard Group increased its position by 29% to 4.97 million shares, Blackrock boosted its stake 86% to 2.98 million shares, and American Century Companies more than doubled its stake to 2.04 million shares. Susquehanna International bought 2.39 million new shares to establish a position of 2.56 million shares. Meanwhile, GoPro insiders bought over 40 million shares and sold nearly 21 million shares in the 12 months ending on Sept. 30.

Those purchases indicate that institutions and insiders haven't given up on GoPro just yet. GoPro also announced a $300 million buyback last quarter that could prop up the stock if it keeps declining. Short interest in GoPro has also slightly waned, although a whopping 43% of shares are still being shorted as of this writing.

The key takeaway
Investors should remember that Foxconn invested in GoPro long before its IPO, making it one of the few stakeholders that can still sell this beaten-down stock at a profit. However, Foxconn is still retaining enough of a stake in GoPro to profit if the company's new drone and flagship cameras sell well next year. Top institutional investors and insiders are also buying more stock than they're selling, which indicates that GoPro investors should think twice before following Foxconn's lead and selling their shares.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.