Desktop Metal (NYSE: DM) has recently made significant moves in its paperwork with the U.S. Securities and Exchange Commission (SEC), sparking a bit of curiosity about its next steps. Just before the release of its fourth-quarter earnings report for 2023, the company filed a Form S-3 registration statement, signaling its intention to offer and sell securities to the public. This move comes on the heels of another filing, a report on company shares submitted by institutional investor The Vanguard Group. It suggests that Desktop Metal is gearing up for potential fundraising activities or other financial plans.
Need to Know Basis
The latest Form S-3, submitted to the SEC on February 14, 2024, allows Desktop Metal to offer and sell up to $250 million worth of securities to the public, including preferred stock, debt securities, warrants, and units, and Class A common stock through a deal they made with financial firm Cantor Fitzgerald. This deal, a controlled equity offering sales agreement, allows Desktop Metal to sell its stock for a total of up to $75 million through or to Cantor.
Moreover, in addition to the recent S-3 filing, Desktop Metal submitted two other Form S-3s to the SEC, one in 2022 and another in 2023. Each of these filings serves a purpose: they enable Desktop Metal to raise funds by offering its securities for sale to the public. While the specific details of each offer may vary, the objective remains the same: to meet the company’s financial needs and support its growth initiatives.
Historically, when a company submits an S-3 statement to the SEC, it sets the stage for one typical result: a capital raise, where the company offers securities to the public to gather funds to pursue other goals such as expanding operations, refinancing debt, or making strategic acquisitions. Moreover, some public companies try to boost investor confidence by demonstrating their growth potential and financial stability with the capital raised. Desktop Metal outlined its intention to use the net proceeds of up to $75 million for general corporate and working capital purposes. These funds may also be assigned to “investments in capital preservation instruments, such as short-term interest-bearing obligations or government-backed securities until they are needed for specific operational expenses or strategic initiatives,” stated the company.
Desktop Metal rings the opening bell (Image courtesy of NYSE)
Fundraising Initiatives Revealed
As reported by the New York Stock Exchange (NYSE) on February 16, 2024, the closing sale price of Desktop Metal stock was $0.55 per share, providing a reference point for potential investors. Since late October 2023, the company stock began dipping below the $1 mark. Often referred to as “penny stock” territory, this stock price might generate market concerns about the company’s performance and future, potentially affecting the terms of any new offerings and the company’s ability to attract investors.
In addition, Desktop Metal recently received notice from the NYSE on November 22, 2023, indicating non-compliance with NYSE’s continued listing standards due to the average closing price of its common stock falling below $1 over a consecutive 30 trading-day period. While this notice does not immediately delist Desktop Metal’s common stock from the NYSE, it means that Desktop Metal has six months to regain compliance. During this time, the company suggested its intention to explore various options, including a reverse stock split, subject to stockholder approval. Desktop Metal stock price will be considered fixed if it quickly goes above $1 per share and stays there for 30 days of trading.
CEO Ric Fulop discussed the company’s performance during the CEO Panel at this year’s Additive Manufacturing Strategies event in New York held from February 6 through 8. He remarked, “Big capital is harder to get than it used to be. Some parts of our business grew 20% last year, like the printed casting business, but others, like the dental side, are not doing well, and that’s a much bigger segment (…) But overall, I think this year we’ll still grow again.”
Ric Fulop during the CEO Panel presentation at AMS 2024. Image courtesy of Ashley Alleyne, 3DPrint.com
Investment Strategies
Meanwhile, the Schedule 13G/A document, filed to the SEC by investment management firm The Vanguard Group, discloses its ownership of Desktop Metal’s common stock. The document reveals that The Vanguard Group controls roughly 5.31% of Desktop Metal shares. As an investment adviser, The Vanguard Group must disclose its ownership stake in specific securities, and according to the filing, the shares were obtained and retained as part of regular business operations and not to control Desktop Metal.
While The Vanguard Group’s Schedule 13G/A provides insight into institutional ownership, the S-3 filing opens avenues for potential capital-raising activities for Desktop Metal, especially as the company continues to navigate the dynamic landscape of the additive manufacturing (AM) industry. The documents also help inform stakeholder’s decisions and serve as a guide for anyone interested in the industry’s financial roadmap.