Velo3D Faces NYSE Compliance Challenge Amid Leadership Changes

Starting 2024 on a challenging note, Velo3D (NYSE: VLD) received a notice from the New York Stock Exchange (NYSE) on January 3, signaling that its stock prices had fallen below the exchange’s minimum requirements. This development occurred amidst a series of strategic moves by the company, including the stepping down of founder Benny Buller and a plan to secure $18 million through new share offerings. Notably, Velo3D is not alone in this situation, as other players in the 3D printing industry have received similar notifications.

Received on December 28, 2023, the Continued Listing Standards Notice from the NYSE cited non-compliance with Rule 802.01C related to the minimum average closing price of Velo3D’s stock over a 30-day trading period. While this warning is serious, it doesn’t immediately lead to delisting but requires immediate action. In that regard, Velo3D says it is determined to retain its NYSE listing. This involves notifying the NYSE within ten business days of its strategy to meet the listing standards again.

NYSE Compliance

To regain compliance, the company must ensure that its common stock not only closes at or above $1 on the last trading day of any calendar month during the six-month cure period – a window to fix the problem with its stock price – but also that the stock’s average closing price is at least $1 throughout the 30 days leading up to that final day.

During this six-month cure period, Velo3D’s stock will continue trading on the NYSE. However, this notice comes amidst other significant financial and leadership changes within the company. Adding to the company’s challenges is the departure of Benny Buller from his role as CEO following a decision by the company’s Board of Directors. This move comes at a time when the additive manufacturing (AM) industry is undergoing significant economic and organizational shifts. In response, Executive Vice President of Operations Brad Kreger stepped in as interim leader while the company is actively searching for a permanent CEO to steer Velo3D into its next growth phase amidst these industry-wide changes.

VELO3D CEO Benny Buller after the ringing of the bell at the NYSE on October 7, 2021. Image courtesy of VELO3D.

Also, in December, Velo3D sold 36 million shares of stock, each for 50 cents. From this sale, they expected to make about $18 million before expenses. The deal also included warrants, allowing buyers to purchase more shares at 56.5 cents each, valid for five years. The funds from the share sale are earmarked for routine business expenses, equipment purchases, and general corporate purposes. Velo3D changed some loan agreements, agreeing to pay $25 million to noteholders. This move, scheduled for the same day as the stock sale, helps the company avoid repaying a large portion of debt in early 2024, which gives them more room to manage their money.

Not a Lone Scenario

Velo3D is not the first 3D printing business to receive such a notice from the NYSE. Similar notices were issued to Desktop Metal (NYSE: DM) and Markforged (NYSE: MKFG). Both were notified of non-compliance under the same rule, primarily due to their stock prices dipping below the $1 threshold over a 30-day trading period. Like Velo3D, these companies were given six months to regain compliance and are actively working on strategies to fix these issues. One of the common options they are considering is a reverse stock split. This move would reduce the number of shares in the market, ideally increasing the stock price and meeting the NYSE’s requirements.

Apart from Velo3D, the NYSE issued Continued Listing Standards Notices to several companies, including Finance of America Companies (NYSE: FOA), FOXO Technologies (NYSE American: FOXO), and Li-Cycle Holdings (NYSE: LICY). In 2023’s uncertain economic and geopolitical climate, many companies, especially those with low-priced stocks, faced pressure regarding their listing status. According to a recent Bloomberg story, since early 2023, hundreds of small public companies have been at risk of delisting from both the NYSE and Nasdaq for not complying with continued listing requirements, particularly failing to maintain a minimum $1 closing bid price per share for 30 consecutive business days.

Receiving a Continued Listing Standards Notice marks a crucial point for a company on the NYSE. If the problems mentioned in these notices, like low stock prices, aren’t fixed, they could result in something worse: delisting from the exchange. Delisting is a separate process that, unlike the notices, has been observed more frequently.

In December 2023, the NYSE delisted 30 companies. This figure aligns with the trend observed over the past few years, with 41 companies delisted in December 2022, 29 in 2021, 31 in 2020, and 39 in 2019. Calculating the average, roughly 35 companies have been delisted each December from 2019 to 2023. Moreover, the NYSE recorded the highest number of companies delisting between 2020 and 2021, dropping 15.28% year-over-year from 2,873 to 2,434.

Velo3D helps create space technology. Image courtesy of Velo3D.

However, despite the financial headwinds, and as the 3D printing industry evolves, companies like Velo3D are adapting and exploring new pathways to growth and stability. Velo3D, which went public in 2021, initially saw its stock valued significantly higher at its debut, close to $10. But since November 22, 2023, the company’s stock has been trading below the $1 mark. As of the second week of January 2024, Velo3D’s stock value further declined, trading at under 40 cents. This situation underlines the volatility and challenges in the stock market, particularly for emerging technologies like 3D printing.