Dream 3D Printing IPOs We’d Like to See: GE Additive and EOS

Given that the response to my Dream M&A posts was so positive, our Editor in Chief, Michael Molitch-Hou, asked me to look at some 3D printing IPOs we’d like to see in 2021.

EOS Gmbh

The EOS M 400 metal AM machine in Audi’s Metal 3D Printing Centre in Ingolstadt, Germany (Courtesy Audi AG)

Let’s start with the obvious one: EOS is the leader in powder bed fusion printers, both in polymers and metals. Competitor SLM Solutions is public. Arcam and Concept Laser were bought by GE. Realizer was bought by DMG Mori. Other competing firms have been given sizable investments.

EOS alone is able to develop parts and techniques suitable for deployment on its thousands of polymer and metal machines. It also has the largest installed base and is the only really true global polymer sintering player. EOS also leads in metals, although GE and, in particular ,SLM Solutions are bringing some competitive pressure. New entrants, such as VELO3D, should also bring more pressure to bear over the coming years.

But, all told EOS has a huge lead in revenue, profitability and installed base over everyone. It is also a very trusted firm. They are working on “million-diode laser” future technologies, as well. A publicly traded global 3D printing firm would be a huge win for Germany and German industry. It would additionally help EOS in beating back the competition from optimistic SPAC participants.

It’s rather unlikely, however. EOS is 100% owned by the Langer family and EOS CEO Marie Langer told us on the 3DPOD (embedded below) that a public offering was not in the cards.

3DPOD Episode 22: Marie Langer the CEO of EOS

Having said that, a dozen SPACs later, the family may have changed its mind. Via class A and class B shares, the family could retain a great deal of control over a public company for many generations, especially if this is coupled in part with a family office or similar.

The Langers seem much more concerned with legacy than money at the moment. The firm is conservative and looks at the very long term. All in all, EOS going public would be very unlikely. If the family contend that this is a once-in-a-generation opportunity to become a DAX company, then maybe they can be persuaded. However, it is more likely that they’d prefer to stay away from the limelight and, rather than think of the future in a quarter-per-quarter window, think of it across the years, decades and generations.

GE Additive

The 3D printed sump cover for the F110 engine. Image courtesy of GE.

GE entered the 3D printing industry very aggressively with acquisitions of Morris, Arcam, and Concept Laser. Frankly, people were terrified of what the cutthroat gang at GE had planned for us all. The logic seemed inexorable with any weight savings on GE’s trains-to-planes-to-turbines empire leading to a faster industrialization of GE’s machines that would always become more production-ready and efficient as a result.

The use of additive in power equipment, train engines, and, most of all, the very profitable and incredibly difficult business of aviation engines would ensure that GE maintained a lead in all of those areas through the application of parts that are topology optimized, faster-to-market, lower-inventory, and higher performance. It seemed like some kind of beautiful auto catalytic cycle.

And it could have been, would have been and somehow, in another much more stable dimension, still is. There is a parallel universe where you can take long safe bets on houses, the U.S. dollar, and GE. A universe of baseball without steroids, apple meaning apple pie and not Apple, where the American flag unites all and the diligent workers engineer the most difficult and trusted things the world has, while we look on in awe.

GE stocks were around $30 a share in 2017 and drifted to below $8 a few times since, but are now on the rebound. An expected explosion in CAPEX spending is driving the stock up now and they should do well off of that. Indeed, recently the firm has seen a sharp rise. But stocks are now at the levels they were in 2009, and below where they were in 1996.

So, the past years have been abysmal for GE. Also, as a companion piece to the Economist’s “an Investment Bonanza is coming“, you may also want to read the 1996 article “what happened to the CAPEX boom.”

GE’s market cap was over $3,981 billion in 2001, $161 in 2008, $65 in 2018 and is now up to $122 again. For the last two years, the firm has seen declining revenues over 16% per year. By selling both the rail and the oil and gas units, GE has sold two businesses that could have benefited immensely from 3D printing and who could have acted as a part of their internal 3D printed flywheel. So, perhaps, 3D printing isn’t strategic anymore? Also, the unit that GE Additive had the strongest relationship with the Fantastically Profitable, GE Aviation, is not doing so hot.

So, for GE, there are a few obvious choices that the conglomerate can make.

1. It can tough it out and wait for demand in Aviation to rebound, hopefully quickly. With demand returning, superior returns from Aviation will power a newly resplendent GE forward into renewed growth as a more focused firm. The resulting funding and market success will then power GE Additive to make better machines fabricating better parts for the most critical applications which will drive sales, leading it to become a leader in additive.
2. It can tough it out and wait for demand in Aviation to rebound, hopefully quickly. With demand returning, superior returns from Aviation will power a newly resplendent GE forward into renewed growth as a more focused firm. The resulting funding and market success will then power GE Additive to make better machines fabricating better parts just for GE itself. It will not really sell machines, but, instead, Additive will become an enabler for Aviation.
3. It can divest itself of Power, Energy, and Aviation and focus on becoming a Medical-only company.
4. It can become a medical-only business and use the cash from divestitures to acquire Philips Medical and other assets to become a leader in medical imaging specifically.
5. It can do some kind of creative switcharoo with Siemens to make a combined Energy business, a combined medical business, and keep Aviation?
6. Or it can slide into irrelevance.

Whatever the option it may be tempting to sell GE Additive or indeed in the heady days of 3D printing stocks, not parts, to spin out GE Additive into a separate public company. This may give the firm the needed cash to carry out a couple of the scenarios above.

What do you think? What 3D printing IPOs do you want to see?