The Rise and Fall of Velo3D: A Cautionary Tale in AM
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Chapter 1: The Enigmatic Journey of Velo3D
Velo3D's story is a perplexing one. Unlike other additive manufacturing (AM) companies that have faced quick downturns due to ineffective technology, market hype, or fierce competition, Velo3D's decline is particularly puzzling. Established with a unique proprietary technology and significant market recognition, Velo3D initially gained traction among top industrial clients and received all necessary certifications for strategic sectors. The company made a splash in the stock market, achieving a staggering valuation of $2.24 billion.
However, this success was short-lived. The situation deteriorated rapidly, resembling a carefully arranged domino setup suddenly collapsing. Velo3D's current state is a stark contrast to its promising beginnings, especially after its founder, Benny Buller, departed over six months ago. Following a series of compliance warnings from the NYSE, the company was delisted and is now trading on the less prestigious OTCQX market, with a dismal valuation of merely $5 million.
For context, the average NBA player's salary for the 2023–24 season was $10,277,000. What should have been a triumphant success story has turned into a cautionary tale.
Section 1.1: The Birth of Velo3D
Founded in 2014 by Benny Buller in Campbell, California, Velo3D initially raised $22 million in funding and worked discreetly on a groundbreaking metal 3D printing method. It later became clear that the total funds raised exceeded $90 million. Much like its contemporary, Desktop Metal, Velo3D was cloaked in an aura of innovation and high expectations. While Desktop Metal struggled to meet its promises, Velo3D emerged as a beacon of success.
In August 2018, the company's significant breakthrough was unveiled: a metal 3D printing process that offered unprecedented design freedom, surpassing traditional methods like Powder Bed Fusion (PBF). The Velo3D Sapphire System was capable of printing complex geometries with angles below 45°, and the proprietary software, Flow, facilitated this process.
With the Sapphire system, parts could be printed with overhangs as low as 5° and large inner diameters without the need for supports, resulting in a remarkable 30-70% decrease in manufacturing costs. Some applications allowed for free-floating 3D printing in the powder bed using materials like Inconel 718 or Titanium. The foundation of Velo3D's success lay in its Intelligent Fusion technology, which relied on process simulation and closed-loop control, a significant challenge in metal 3D printing.
Section 1.2: Rapid Growth Amid Challenges
Velo3D quickly became a household name in the AM industry, particularly in the United States, where metal 3D printers were primarily produced abroad. As a local manufacturer, Velo3D's popularity surged, especially during the COVID-19 pandemic when it raised an additional $40 million, bringing total funding to $150 million.
In July 2020, the company received its largest order to date, reportedly from an aerospace client, worth $20 million. Subsequently, in August 2020, Velo3D entered into a joint development agreement with Lam Research Corporation, a semiconductor industry supplier. The following year, Velo3D went public on the New York Stock Exchange through a SPAC merger, securing an additional $274 million in funding.
Despite these successes, signs of distress began to surface. The company, now under the leadership of former EOS CEO Dr. Adrian Keppler, was expanding too rapidly, leading to operational losses and a troubling cash burn rate.
Chapter 2: The Downfall
By the third quarter of 2023, Velo3D reported disappointing financial results, despite a year-on-year revenue increase. The company announced a significant workforce reduction of approximately 20%. While revenue grew to $22.4 million, it reported a net loss of $17.1 million. In December 2023, Velo3D achieved a significant milestone by becoming the first metal 3D printer manufacturer to comply with the highest cybersecurity standards set by the US Department of Defense, yet this was overshadowed by the resignation of Benny Buller as CEO, a move prompted by the Board of Directors.
His successor, Brad Kreger, inherited a company facing financial challenges despite a significant increase in revenue. However, operational losses continued to mount, raising concerns about the company's sustainability. The year concluded on a bleak note, with Kreger acknowledging the impact of their hyper-growth strategy on performance and customer satisfaction.
As the NYSE began issuing compliance notices, Velo3D's stock faced a reverse split to stave off delisting. The first quarter of 2024 showed slight improvement, but the company continued to struggle financially, ultimately leading to its delisting from the NYSE due to a persistent decline in market valuation.
Trading began on the OTCQX Best Market under the symbol "VLDX," a move that, while offering reduced reporting requirements, often results in lower visibility and trading activity. Velo3D's valuation plummeted to a mere $5 million, a staggering -99.8% drop from its peak.
What's Next for Velo3D?
The future remains uncertain. The company’s previous leadership has departed, and efforts to salvage the situation have been initiated. The question now is whether Velo3D can regain its footing or return to a more stable valuation.
Despite its current low price, interest in acquiring the company seems minimal. Potential buyers may be wary of underlying issues beyond the technology, patents, and customer base. The dynamic nature of Velo3D's situation leaves room for significant changes, and the landscape could shift drastically in a short time.
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