AM Investment Strategies
AMS Spring 2023

Desktop Metal (DM) Buys EnvisionTEC to Quickly Boost Revenues?


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Wow. Publicly traded Desktop Metal (NYSE:DM) has just purchased EnvisionTEC for $300 million in stock and cash. For my part, I would have paid all my money to be a fly on the wall at that negotiation table. Al Siblani and Ric Fulop negotiating, what a 3D chess fiesta bowl that would have been. The companies hope to close the transaction in Q1. EnvisionTEC will still be run by Siblani as an independent unit.

Desktop Metal co-founder and CEO Ric Fulop with the DM Production System

Desktop Metal CEO Ric Fulop said of the deal:

“I’m thrilled to partner with Al and the EnvisionTEC team to bring significant growth to the additive market. EnvisionTEC is a true pioneer and responsible for many of the leading technologies widely used today to produce end-use photopolymer parts through additive manufacturing. Together, Desktop Metal and EnvisionTEC have an opportunity to shape the future of Additive Manufacturing 2.0 and transform how parts are made around the world. I look forward to welcoming EnvisionTEC to the Desktop Metal team to deliver world-class additive manufacturing solutions that help make our customers successful.”

Al Siblani

EnvisionTEC CEO Al Siblani said:

“I am excited and honored to partner with Ric and the Desktop Metal team to deliver end-use parts in both metal and polymers as we implement Ric’s vision on the future of Additive Manufacturing 2.0. Bringing the two companies together will deliver a global footprint of customers that can cross-benefit from our combined technology platforms. I believe we have many opportunities to scale the business, disrupt traditional manufacturing, expand our customer base, and create value for our shareholders.”

Desktop Metal extols EnvisionTEC’s virtues as having “one of the strongest intellectual property portfolios in the area-wide photopolymer 3D printing market, counting over 140 issued and pending patents, which Desktop Metal believes includes blocking intellectual property.” It also mentions that they have over 5,000 customers, 1,000 of which are using it for dental end use parts. The company counts Cartier, Ford, Hasbro, as well as Celgene, among its customers. It mentions that EnvisionTEC has a “broad library of over 190 materials, featuring photopolymer resins with material properties in-line with or exceeding those of thermoplastics and multiple FDA-listed and 510(K)-cleared resins for the manufacturing of medical devices.” It also states that this will expand and complement Desktop Metal’s channel.

The company also notes:

EnvisionTEC is also a pioneer in digital biofabrication additive manufacturing with its Bioplotter platform, which supports the production of biocompatible parts for medical applications such as bone regeneration, cartilage regeneration, soft tissue fabrication, drug release, and organ printing.

Founder and CEO of EnvisionTEC, Al Siblani

It concludes by saying, “Desktop Metal will gain digital casting capabilities via EnvisionTEC’s industrial-scale robotic additive manufacturing (RAM) product platform.” And that “Single Pass Jetting technology originally developed for its Production System to drive productivity enhancements and improve part economics across builds as large as 1.8 x 0.9 x. 0.9 meters,” through EnvisonTEC tools.

So, it is important to note that Desktop Metal believes bioprinting, scaling up and polymer 3D printing to be exciting things for Wall Street. Things such as patents and larger scale would also seemingly be of interest. Buying EnvisionTEC’s heritage, name and, most of all, revenue does much to strengthen Desktop Metal’s success in maintaining momentum. Its current valuation being in the $4 billion range, but its revenues comparatively paltry, Desktop Metal has to resort to acquisitions to buy significant revenue. Turbocharging the EnvisionTEC business through competitive pricing or price incentives will also create breathing room for Desktop Metal. EnvisionTEC is a well-established business and its technology is used to make tens of millions of parts. There is definitely real substance there in terms of an acquisition that could bring real value to Desktop Metal shareholders.

It is rather a disparate acquisition for a firm that calls itself Desktop Metal, however. Rather than integrating into powder or buying a service firm in metals or a competing metal technology, it now will derive the vast majority of its revenue from polymers and not metal. It went from being a firm focused on its own technology to one deploying several technologies. DM now looks much more like 3D Systems or other comparable firms rather than a technology firm laser-focused on its own technology. To me, this smacks of a pure revenue seeking play to bolster its chances of meeting expectations rather than a strategy to enhance long term shareholder value.

If Desktop Metal’s technology is the end-all-be-all of metal fabrication technologies, why invest in polymers? Why bother with bioprinting and plastic hearing aids if you can make metal parts cheaper and faster than anyone else? To me this acquisition, on the one hand, could create a lot of value for Desktop Metal shareholders. On the other hand, it undermines the central investment thesis of Desktop Metal. It’s similar to if Tesla said “electric if the future, Tesla is the future” right before announcing the acquisition of Cummins Diesel.

The clear takeaway is that Desktop Metal itself will use its momentum and general Wall Street frothiness to acquire revenue to create a portfolio of companies in 3D printing. Similar to 3D Systems before it, the company seems to want to harness collective optimism and center attention on its expanding inevitableness.

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