GoPro Sees 41% Revenue Drop, Warns Loan Default Could Kill Starman Merger

GoPro expects third-quarter revenue of about $96 million, down 41% from $163 million a year earlier, and told the SEC on Tuesday that unwaived covenant breaches could default its loans and sink its merger with Starman Optical.

The company filed a late-filing notice on Nov. 10 saying it could not submit its 10-Q on time. Gross margin collapsed to about 12.7% from 35.1%. Operating expenses fell to about $60 million from $73 million. GoPro said its statements will continue to carry substantial doubt about its ability to continue as a going concern for the next 12 months.

Why GoPro cannot file on time

GoPro said it needs more time to close its books and account for financing arrangements made during the third quarter. The work runs into a previously disclosed material weakness. The company lacks effective controls to evaluate accounting for, and valuation of, embedded features in its financing deals. The weakness has not been fixed.

The same problem forced a restatement. On Oct. 9, GoPro's audit committee concluded its 2025 annual statements and quarterly statements for Q3 2025 and the first two quarters of 2026 should no longer be relied on. The errors involved warrants issued to lender Mateo Financing in August 2025 and convertible debentures sold to Yorkville affiliate YA II PN in 2026. GoPro said the errors did not change revenue, gross margin, operating loss or cash. It found them while preparing the merger proxy and filed restated reports on Oct. 19.

In the quarter itself, GoPro drew a further $20 million of convertible debentures from Yorkville on Sept. 8, completing a facility of up to $50 million. The debentures convert at the lower of $1.35 or 98% of the lowest recent daily average price, with a floor of $0.1736. They carry an 18% rate after an uncured event of default.

How fast has revenue fallen?

Quarterly revenue has dropped by more than half from its Q4 2025 peak, according to MLQ.ai's SEC-derived financials and the preliminary figure in the filing.

• Q3 2025: $162.9 million
• Q4 2025: $201.7 million
• Q1 2026: $99.1 million
• Q2 2026: $104.9 million
• Q3 2026 (preliminary): about $96 million

What does the merger promise, and what could end it?

GoPro agreed on Sept. 1 to merge with Starman Optical, a subsidiary of Action Acquisitions LLC. Each GoPro share would convert into $1.14 in cash, subject to a downward adjustment if net working capital falls short of a threshold, plus 0.1 share of the surviving company, which would remain listed on Nasdaq. GoPro put the cash component at $285 million in total and said existing shareholders would keep about 10% of the company. Its roughly $92 million of debt would be repaid in full at closing. Midtown Equities LLC has committed to fund the buyer's payments at closing.

The clock is short. Either side can walk away if the deal has not closed by Dec. 31, 2026, and the buyer's obligation to close is conditioned on the absence of a material adverse effect on GoPro. An acceleration of GoPro's debt could cause a closing condition to fail and let the acquirer terminate the agreement. GoPro would owe a $10 million termination fee in some cases, including if it accepted a better offer. The deal also requires a majority shareholder vote and antitrust clearance; GoPro has filed a preliminary proxy statement.

The buyer's plan is to turn GoPro into a U.S. optics manufacturer. Starman says it will add its U.S.-made optical transceivers for AI data centers to GoPro and use GoPro's more than 2,500 U.S. patents in defense, government, robotics and aerospace markets. On Oct. 20, Starman New Photonics announced a partnership with Taiwan's Gemtek to build 800G and 1.6T transceivers at a planned $150 million New Jersey plant approved for up to $37.5 million in state tax credits.

"The rapid growth of AI is creating enormous demand for advanced optical technology, but much of the manufacturing remains overseas," said Charles Tebele, chief executive of Starman Holding.

GoPro did not say which covenants it has breached, how much debt is affected or when it expects lenders to respond. It said it will file the 10-Q and the earnings 8-K as soon as practicable. Without waivers, the merger's fate now rests with lenders whose acceleration rights could trigger the Dec. 31 walk-away clause.