The global economic landscape is an uncertain one, bringing about some expected developments, such as Align Technologies’ purchase of Cubicure, and some less expected. Exemplifying this latter trend is Sigma Additive Solutions (NASDAQ: SASI), which has announced that it is selling its 3D printing intellectual property (IP) and acquiring the assets of an online travel company, NextTrip.
Sigma Additive Solutions’ PrintRite3D technology employs sensors and software to monitor various aspects of metal laser powder bed fusion (LPBF) machines. Traditionally, internal access for monitoring risked voiding the warranty or required OEM assistance, making Sigma’s direct collaborations with OEMs and aerospace entities through America Makes essential. Newer companies like Additive Assurance and Phase3D offer alternative quality assurance solutions, mounting equipment on easily accessible parts of the printer and using advanced techniques like structured light scanning, moving beyond the traditional reliance on optical and thermal cameras.
In March 2023, Sigma announced that it was exploring methods for increasing shareholder value, “including a possible strategic investment, acquisition, merger, business combination, or similar transaction.” With Lake Street Capital Markets as financial advisor, the company has found a buyer for its AM assets, but who that buyer is has not been made public.
Its most recent partner has been Materialise, who could potentially use Sigma’s IP to strengthen its own AM quality control portfolio. Other possibilities include end users like Honeywell, who have previously tested PrintRite3D for aerospace applications, or machine manufacturers, such as EOS or Nikon. In fact, this latter business may make the most sense, since Nikon already has a metrology division needed for performing AM QA but may lack the IP related to it. In 2017, Sigma actually established a partnership with Morf3D, which was ultimately acquired by Nikon.
In the past, I was skeptical of Sigma due to its status as a penny stock and my experience investigating a likely pump-and-dump scheme by a penny stock on the Australian market. I went so far as to trace back Sigma’s reverse merger onto the pink sheets, but the firm’s large industry partners and assurance from some individuals in the market led me to change my stance. Nevertheless, Sigma has failed to see the success that its significant collaborators would suggest, which seems to imply that either the technology couldn’t deliver as promised or the business model wasn’t turning around the necessary profits.
Given Sigma’s interesting history as a business entity, it’s actually less surprising than one might initially think that it is transforming itself into an online travel business. Sigma’s acquisition of NextTrip involves a non-binding letter of intent to buy 100% of NextTrip’s capital stock. In exchange, NextTrip will receive shares of Sigma’s common stock amounting to 19.99% of its outstanding shares, along with additional shares based on post-closing performance milestones. Valued at $0.40 per Sigma share, the deal could reach an approximate valuation of $48 million if all milestones are met.
NextTrip aims to diversify and intensify its business, having recently acquired a scalable travel booking engine that generated over $400 million in bookings in 2019. This acquisition is expected to substantially speed up NextTrip’s business growth. The firm also boasts a newly assembled management team with diverse expertise, from online travel distribution to wholesale distribution and travel technology.
The deal with Sigma essentially represents a reverse merger on behalf of NextTrip in order to get a public listing on the Nasdaq. This will potentially give the company access to more capital at favorable terms, allowing it to tap into adjacent markets and scale its operations more efficiently. Existing Sigma shareholders will retain their equity, constituting a single-digit percentage of Sigma’s fully diluted equity, if NextTrip meets all business milestones. After a period of strategic realignment, NextTrip aims to focus on driving the company’s growth, possibly exploring mergers and acquisitions to expand its product offerings. The transactions are expected to be completed in the fourth quarter of 2023. Until then, both Sigma and NextTrip will operate as separate, independent companies.
TroyJensen, Senior Research Analyst at Lake Street Capital Markets, may be able to give us more insight into the deal at Additive Manufacturing Strategies, February 6 to 8, 2024, where he is participating on the “Printing Money: M&A and Public Markets” panel.
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