Markforged will be going public through a blank-check merger and will receive an injection of funding to further its mission.
In what has been a historic year for global stock markets, one of the defining stories has been the spectacular rise of the SPAC, or special purpose acquisition company, for the uninitiated. These blank-check companies have been an investment vehicle for decades but have largely gone unnoticed by the masses. All that changed over the past calendar year as exciting, futuristic growth companies began to come around to the idea of taking themselves public via the SPAC route.
SPAC mania has seen companies like Lucid Motors, Virgin Galactic, Nikola Motor Company, DraftKings, Opendoor, QuantumScape, Velodyne Lidar, Desktop Metal, SoFi, Butterfly Network and 23andMe all hit the public market after merging with a SPAC. Previously seen as a means of last resort for small, struggling companies looking to sell themselves, emerging growth stocks that may not have current revenue have been able to go public without the financial scrutiny that is part of the traditional IPO process. SPACs, often backed by a high-profile financier like Chamath Palihapitiya or Michael Klein, allow companies to bypass the banks entirely and market themselves directly to retail investors.
Most of the companies mentioned above have something in common—they won’t have any sales to speak of for several years. Virgin Galactic, for example, is a commercial space tourism company that is yet to send a paying customer to outer space. This has led to more than a few investors getting burned by high-flying, hyped-up SPAC names. Churchill Capital Corp IV, the company taking Tesla challenger Lucid Motors public, has seen its share price decline by over 50 percent from its highest levels. With charges of outright fraud levied against it, Nikola Motors has been forced to endure the resignation of its chairman, Trevor Milton, while its stock has tumbled from a high of over $90 shortly after the merger to under $15 at its more recent close.
Prior to the explosion of SPACs, very few of these companies would have been able to access public markets. They’re simply too speculative, and there’s a high probability that more than a few of the biggest companies going through the SPAC merger process will never produce a finished product—let alone make a profit. SPACs are risky, but they are a useful tool for the markets that will ultimately fuel innovation and growth in exciting sectors like electric vehicles, biotechnology, 3D printing, artificial intelligence (AI), space exploration and climate-friendly technologies.
One of the latest companies to make its move on the SPAC market is Massachusetts-based Markforged. The metal 3D printing startup will merge with one, led by Kevin Hartz. The merger values Markforged at $2.1 billion and gives the company close to $400 million in fresh working capital that will go right into research and development for the young company. Investments will be made into new products, materials and new verticals for existing technology. The merger is expected to be completed by the summer of 2021, at which point the company will trade under the ticker “MKFG.”
“When I co-founded Markforged, our mission was to reinvent manufacturing by driving innovation and creating products and technologies that have the potential to transform an entire industry. I’ve been thrilled that Markforged has thrived in its successful pursuit of these ambitions with a growing network of customers across major sectors and around the world,” said Greg Mark, the founder and chairman of Markforged.
Mission accomplished, Greg.
Markforged is going public with a full head of steam and secular tailwinds driving interest in its product and platform. This move into the public market is an exciting development for the company, which was founded in 2013 and has used its 3D printing technology to create over 10 million parts. Its machines are used in over 10,000 shops spanning 70 countries. In the most recent fiscal year, the company booked over $70 million in sales.
Unlike many SPAC targets, Markforged is a legitimate entity with a preexisting customer base and steady revenue growth in a field that is expected to see exponential growth in the coming years. With a fresh infusion of capital, the company is aiming to position itself as a leader in the field of additive manufacturing.
“We’ve been at the forefront of the additive manufacturing industry,” said CEO Shai Terem in the press release announcing the merger, “and this transaction will enable us to build on our incredible momentum and provide capital and flexibility to grow our brand, accelerate product innovation, and drive expanded adoption among customers across key verticals.”
At its core, Markforged provides a way for investors to play two key trends in the world of technology—3D printing, an industry that is up ninefold from $2 billion in 2012 to $18 billion in 2021 and is expected to reach over $100 billion by the end of the decade, and AI through the company’s AI-powered additive manufacturing platform.
The AI-powered additive manufacturing platform is something that sets Markforged apart from its competitors. The company’s Digital Forge is a powerful combination of software, materials and 3D printers that runs on Markforged’s browser-based Eiger 3D printing software, which interacts seamlessly with the company’s printers. Eiger 3D is easily accessible and secure.
As Markforged users and customers print more parts, the software platform is learning how to more effectively and efficiently function with an AI platform called Blacksmith. The system gets smarter with every printing job. The AI unlocks additional value for Markforged and sets it apart from its competitors. The power of AI will enable Markforged users to cut down on wasted materials and get products and parts to market on an accelerated time frame. Blacksmith improves consistency and quality and helps manufacturers become more agile and resilient. Markforged believes its software can drive a shift toward adaptive manufacturing and revolutionize the industry.
On the hardware front, Markforged features a line of printers that are strong, reliable and precise, and which feature connectivity to the company’s powerful software platforms. Markforged manufactures and sells 3D metal printers, industrial composite 3D printers and desktop composite 3D printers. Each of the machines can print using a variety of materials, including stainless steel, copper, nylon, Onyx, carbon fiber, fiberglass or Kevlar.
Markforged’s printers and software have been utilized by companies in the aerospace, automotive, defense, electronics, consumer packaged goods, medical and energy industries—including global leaders like Siemens, which turned to Markforged and the X7 to improve tooling for wind turbines, or Shukla Medical, which worked with Markforged to improve its prototyping process for orthopedic implant removal tools.
With a fresh $400 million to work with, Markforged is a step closer to realizing its goal of driving widespread adoption of 3D printing in the manufacturing industry through superior hardware and a revolutionary software platform powered by AI. As the company prepares to enter the public markets, it will come under increased scrutiny and face pressure to deliver results. The valuation—approximately 30 times the company’s current sales—is steep but is at a discount when compared to competitor Desktop Metal, whose stock trades at nearly 100 times its sales.
The SPAC deal for Markforged and one comes at a time when investors are beginning to shy away from the mania and inflation fears that drive the major stock indices lower. This may be a blessing in disguise, however. The company saw little post-deal appreciation in share price and remains at a relatively reasonable valuation. Already, one major investor, ARK Invest’s Cathie Wood, has been snapping up shares. Wood, whose calls on Tesla, Zoom and a host of other game-changing technology companies generated outsized returns, has been bullish on 3D printing stocks. If Wood is giving Markforged her blessing, at these prices, that could bode well for the company.
