Read time: 13 mins.
Key highlights:
- Rules are rules: Why some of AM's biggest brands are in hot water with the NYSE.
- The path to compliance: How Velo3D, Desktop Metal, Markforged & Nuburu can get back on track.
- Promises, promises: What impact are the noncompliance notices having on the rest of the AM industry?
This article was first published via the Additive Insight newsletter on February 29th, 2024.
What does it say about an industry that, in under two years, six of its publicly listed companies have been hit by the same noncompliance notice from the New York Stock Exchange (NYSE)?
That it’s been overhyped? That it’s being undervalued? Or that each company tried to run before they’d even mastered walking?
As it stands, two of those companies have manoeuvred their way to compliance and have since remained above the NYSE’s 1.00 USD threshold per Rule 802.01C. The other four notices of noncompliance are more recent occurrences, although one company has been here before, and the share value of each remains way below 1.00 USD.
Their respective futures are in the balance, with each company acknowledging the need to assess the strategic alternatives available to them, but each finding themselves with little bargaining power.
Among Desktop Metal, Markforged, Velo3D and Nuburu, we have some of additive manufacturing’s most renowned brands. Brands that have pledged to turn metal additive manufacturing into a bone fide manufacturing method, brands that have brought mainstream media attention back to the industry, and brands that have dominated the trade media headlines too.
At the time of writing their share values are as follows:
• Markforged: 0.62 USD
• Desktop Metal: 0.46 USD
• Velo3D: 0.27 USD
• Nuburu: 0.16 USD
What is Rule 802.01C?
Rule 802.01C is one of many rules contained within the NYSE’s Listed Company Manual, which exists to hold companies to account and protect public market investors.
Such rules serve to ensure that the companies investors put their money into hold a reasonable amount of value.
For those in breach of Rule 802.01C, companies have six months to regain compliance, which is done when the share price of their common stock has a closing price of at least 1.00 USD on the last trading day of any calendar month and an average closing share price of at least 1.00 USD over the 30 trading-day period ending on the last trading day of that month. Failing to comply at the end of that six-month timeframe could result in a delisting.
Regaining Compliance
There are several reasons for a company’s share value to dip below 1.00 USD for 30 consecutive trading days but put simply, it’s because the shares aren’t in demand by the free market. That is to say, there are more investors open to selling the shares than there are investors currently willing to buy them.
Now, that can change organically since it might be a while before the actions taken have an impact, but a noncompliance notice for a breach of Rule 802.01C leaves a company only two quarters to raise its share value back above 1.00 USD. In the manufacturing machinery business, that’s not a long time at all.
And the options available to them aren’t many. The first option is the obvious one. Use as much of the six months as you can to make some amendments to the structure of the business, hoping the share value rights itself as a natural consequence.
Plan A, however, doesn’t always come to fruition. Shapeways and Fathom – the two other AM companies to have been hit with a Rule 802.01C noncompliance in the last two years – both pursued a reverse stock split, which is typically Plan B.
Troy Jensen, a Cantor Fitzgerald Stock Analyst, expects at least some of the remaining noncompliant four to do the same. He told TCT: “I would guess all three,” referring in this instance to Desktop Metal, Markforged and Velo3D, “do a reverse stock split once they run out of time.”
