Dec 1, 2016 ยท 4 minutes

For GoPro, 2016 has been the year of Karma.

The year started off badly for the once high-flying maker of wearable cameras, after it warned investors that revenue during the 2015 holiday quarter would decline 31% and that it would lay off 7% of its workforce. That news took nearly a quarter off the stock's value.

A few weeks later, GoPro had a couple more surprises, reporting a 25 cents a share loss in the quarter (against 83 cents a share in profit a year earlier) and the departure of its CFO. That sent the stock down another 9%.

Back in January, we noted that GoPro insiders had insulated itself from such bad news by selling stock during its June 2014 IPO and by selling even more stock in a secondary offering five months later.

Think about that. A promising company went public to great fanfare, with half the money going to insiders. A few months later, it had a much quieter secondary offering that raised three times as much money, with even more of the take going to insiders. And the insiders kept selling as the stock sunk. Does anyone now wonder why the stock fell 25 percent in an evening? The answer is, because insiders don't care.

GoPro was up front open about this. Back when GoPro went public, its CEO Nicholas Woodman told the New York Times the IPO was more of a luxury, rather than the desperate necessity a public offering can be to companies short on cash. Again, a key reason was to pay out shareholders, not so much raise money for new products and markets.

Mr. Woodman said that going public wasn’t a necessity, since the company already makes money. But having a freely traded stock could help existing shareholders, including employees, cash out some of their holdings. And the attention that the highly anticipated I.P.O. would bring was an enormous marketing boost.

Fast forward to this past month and things are looking more dire. The company's third-quarter revenue of $241 million was $72 million shy of analyst expectations. In fact, revenue for the first nine months of 2016 was 46% below the 2015 figure, while the company swung from a net profit of $71 million last year to a net loss of $303 million this year. GoPro has now fallen short of Wall Street's profit estimates for four of the last five quarters.

That's not just a disappointing performance, it's worrisome because GoPro is burning through the modest cash it raised for the company in its stock offerings. In the first nine months of 2015, GoPro's operations generated $137 million in cash flow. So far this year, it has a negative $120 million in cash flow. Its cash on hand has fallen from $280 million at the beginning of the year to $132 million in September.

So if GoPro didn't need its IPO proceeds when it went public 18 months ago, it needs them now. The company has been spending a lot on things like developing new products like its Hero5 line of cameras and its Karma drone, as well as marketing on things like its new entertainment initiative. The new devices were released ahead of this year's holiday season, in hopes of pushing up revenue this quarter. But they have suffered a few glitches.

Part of GoPro's revenue disappointment last quarter was caused by what Woodman described as “production issues” for the Hero5 Black camera and the Karma. In a conference call with analysts, Woodman said “our teams worked tirelessly to solve the problems” and that production of the Hero5 cameras is back on track. Still, analysts wonder whether demand for them will ever expand beyond the action sports enthusiasts.

A few days after Woodman cited those production problems, GoPro recalled all its Karma drones because some of them lost power while in flight. And that is probably as good a metaphor as you will find for GoPro in 2016: Karma dropping out of the sky at the worst possible moment.

This week, in a press release cheerily titled “Solid Holiday Demand in the US for GoPro Hero5,” GoPro told investors, way down in the fifth paragraph, that it would lay off another 200 workers, equal to 15% of its workforce. The company will abandon the entertainment business that never made much sense to some. Also, Tony Bates will step down as president this month. It was a companion bookend - layoffs and the loss of a top executive – to the news GoPro announced back in January.

GoPro is to hardware what Twitter is to social media – a company with products that inspire intense loyalty among its more ardent customers but that has problems reaching a new audience and that therefore sees its stock mired in a slump. In GoPro's case, there is also a cavalier attitude toward investors telegraphed by the rich payouts to insiders during its stock offerings.

During the past year or so, investors have been waking up and slowly losing patience with the company. GoPro's stock was briefly worth $11.3 billion about three months after its June 2014 IPO. Today, it's valued at $1.4 billion.

Woodman said the latest moves are part of “a clear roadmap for restored growth and profitability in 2017.” But these moves look a lot like the kind of housecleaning a company does when it's readying itself to be acquired: cutting costs, reshuffling top ranks, shuttering fringe divisions. Depending on the interest among potential suitors, that may end up being the best news GoPro investors have had in a long while.