The roots of Gogo Inflight Internet services go back to 1991, when the company, then called...

Transcribed Image Text:

The roots of Gogo Inflight Internet services go back to 1991, when the company, then called Aircell, developed technology for in-flight phone services. In 2006, the company made a major change in strategy when it secured a 10-year license through the Federal Communications Commission for in-flight Internet services. The majority of U.S. airlines use Gogo for in-flight Wi-Fi services. Though Gogo offered airline passengers in-flight Internet options, the planes using air-to-ground technology still experienced significant lags and were unable to support the streaming of movies and other data-heavy applications. In 2016, Gogo announced the installation of 2Ku in an Aeromexico Boeing 737-800. Gogo's newest technology dramatically increased speed and coverage, enabling not only streaming but also "gate-to-gate" coverage, allowing passengers to maintain seamless Internet coverage in airports and within connecting flights. As of 2019, 2Ku had been installed in over 600 aircraft, and Gogo listed a backlog of 1,400 other planes. After raising $187 million in a June 2013 IPO, underwritten by Wall Street heavy hitters such as Morgan Stanley, JPMorgan, and UBS, Gogo hit the market at $17 per share. The price of the stock fell quickly over the following months, bottoming out at just over $10, but then recovered and hit a high of almost $33 in December. The stock has had a rocky journey, sharing in the enormous impact of the 2020 COVID-19 pandemic on the travel industry. In mid-2020, its shares were trading at an anemic $2.21. Though Gogo saw a surge in sales with the expansion of its 2Ku network, it has seen those sales decline in a critical period when even the most robust travel-related industries are experiencing major contraction. At the end of 2019. Gogo was already running short of cash, having used up the proceeds from its 2013 public offering to invest in the 2ku initiative and further endangering its already precarious market position. Gogo is certainly poised to be part of the packages that airlines have already begun to offer travelers in mid-2020 to tempt them back to the skies, but it's hard to tell if Gogo will be able to recoup its losses and achieve its badly needed tumaround. Questions for Discussion 17-29. Given the risk, what would motivate an investor to purchase stock in Gogo? 17-30. Why would Gogo sell stock rather than taking on additional debt financing? Do you think this was a good decision? 17-31. What role did underwriters, such as Morgan Stanley, JPMorgan, and UBS, play in the Gogo IPO? 17-32. Using a Web source, such as Yahoo! Finance or www.nasdaq.com, obtain the current price of Gogo stock. What has happened to the price of the stock over the past 6 months? What about the past 2 years? What do you predict will happen in the future, and why? 17-33. Would you invest in Gogo right now? Why or why not? The roots of Gogo Inflight Internet services go back to 1991, when the company, then called Aircell, developed technology for in-flight phone services. In 2006, the company made a major change in strategy when it secured a 10-year license through the Federal Communications Commission for in-flight Internet services. The majority of U.S. airlines use Gogo for in-flight Wi-Fi services. Though Gogo offered airline passengers in-flight Internet options, the planes using air-to-ground technology still experienced significant lags and were unable to support the streaming of movies and other data-heavy applications. In 2016, Gogo announced the installation of 2Ku in an Aeromexico Boeing 737-800. Gogo's newest technology dramatically increased speed and coverage, enabling not only streaming but also "gate-to-gate" coverage, allowing passengers to maintain seamless Internet coverage in airports and within connecting flights. As of 2019, 2Ku had been installed in over 600 aircraft, and Gogo listed a backlog of 1,400 other planes. After raising $187 million in a June 2013 IPO, underwritten by Wall Street heavy hitters such as Morgan Stanley, JPMorgan, and UBS, Gogo hit the market at $17 per share. The price of the stock fell quickly over the following months, bottoming out at just over $10, but then recovered and hit a high of almost $33 in December. The stock has had a rocky journey, sharing in the enormous impact of the 2020 COVID-19 pandemic on the travel industry. In mid-2020, its shares were trading at an anemic $2.21. Though Gogo saw a surge in sales with the expansion of its 2Ku network, it has seen those sales decline in a critical period when even the most robust travel-related industries are experiencing major contraction. At the end of 2019. Gogo was already running short of cash, having used up the proceeds from its 2013 public offering to invest in the 2ku initiative and further endangering its already precarious market position. Gogo is certainly poised to be part of the packages that airlines have already begun to offer travelers in mid-2020 to tempt them back to the skies, but it's hard to tell if Gogo will be able to recoup its losses and achieve its badly needed tumaround. Questions for Discussion 17-29. Given the risk, what would motivate an investor to purchase stock in Gogo? 17-30. Why would Gogo sell stock rather than taking on additional debt financing? Do you think this was a good decision? 17-31. What role did underwriters, such as Morgan Stanley, JPMorgan, and UBS, play in the Gogo IPO? 17-32. Using a Web source, such as Yahoo! Finance or www.nasdaq.com, obtain the current price of Gogo stock. What has happened to the price of the stock over the past 6 months? What about the past 2 years? What do you predict will happen in the future, and why? 17-33. Would you invest in Gogo right now? Why or why not?