The epic failure of the Karma drone has led to more worries for GoPro. Lawfirm Bronstein, Gewirtz & Grossman, LLC has notified investors of a class action lawsuit filed against the company and some officers, on behalf of shareholders who purchased GoPro stock between September 19, 2016 and November 4, 2016.
The suit seeks to recover damages against GoPro for alleged violations of the federal securities laws under the Securities Exchange Act of 1934 (the “Exchange Act”).
The suit was prompted by the recent financial problems that the company has faced, culminating in the recall of the long-awaited Karma drone. GoPro, traditionally a manufacturer of wearable action cameras, announced that it would produce its own drone last year. Sports enthusiasts already familiar with GoPro’s action cameras greeted the news with interest; and many industry insiders speculated that the new product line would revive GoPro’s failing fortunes. But manufacture of the drone proved harder than the company originally thought, and the release date was postponed for months. GoPro finally announced the Karma drone – a compact and foldable drone -on October 23, 2016.
While the initial response to the Karma was positive, problems rapidly ensued. DJI’s release of the new Mavic introduced a strong competitor to the new drone. Soon, complaints of the Karma losing power mid-flight began to appear; finally, GoPro announced a recall of all Karma drones on November 8, less than 3 weeks after release, saying: “in a very small number of cases, Karma units lost power during operation.”
The delays and the drama have taken their toll on GoPro’s stock price. Poor Q3 revenue – substantially below the company’s earlier projections – caused the stock to fall; news of the recall sent shares spiraling further.
The lawsuit claims that during the specified period this fall, GoPro made “materially false and misleading statements regarding the Company’s business, operational and compliance policies,” by failing to inform people that the drone would fail. “Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (1) GoPro’s Karma drones likely to lose power midflight, and fall out of the sky; (2) GoPro had knowingly overstated the efficacy of the Karma drone and thus its customer demand for the new product; (3) once this issue was made public, it would require a pricey recall of Karma drones; and (4) consequently, GoPro’s public statements were materially false and misleading at all relevant times,” reads the complaint announcement.
Investors who wish to join this case should visit the law firm’s website: http://www.bgandg.com/gpro.