SpaceX Supplier VELO3D is The Latest 3D-Printing SPAC

Want to own a piece of SpaceX’s success? You now have your chance to own a key supplier! 

3D-printing has been making a comeback lately, with many startups coming to the public markets by merging with special purpose acquisition companies (SPACs). Desktop Metal (NYSE: DM) merged with Trine Acquisition last year, and Markforged announced its deal with one (NYSE: AONE) last month.

SpaceX supplier Velo3D is now joining the fray, confirming recent reports that it will merge with JAWS Spitfire Acquisition (NYSE: SPFR) in a $1.6 billion deal. Here’s a look at Velo3D.

Why Velo3D is Merging with JAWS Spitfire (SPFR)

Velo3D specializes in 3D printers for high-value metals, dubbed its Sapphire line of printers. That makes the company’s offerings useful in a wide range of industrial applications like microturbines or heat exchangers, for example. Velo3D’s technology allows numerous parts to be consolidated into a single unit, facilitating simpler designs and greater efficiencies while generating cost savings.

The company’s commercial launch was in late 2018, and Velo3D has since garnered many high-profile customers including Elon Musk’s SpaceX and industrial behemoth Honeywell (NYSE: HON), among others. SpaceX leveraged Velo3D’s technology to develop its Raptor engine, which powers the Starship that the rocket company is developing with the hopes of sending humans into deep space. SpaceX is also an investor in Velo3D.

Velo3D had raised $28 million in a Series D funding round less than a year ago, although the valuation that it fetched in the private market remains unclear. That capital raise had brought Velo3D’s total funding at the time to $138 million. 

The goal is to transition from an upfront sale model to a recurring revenue model, which Velo3D says it can accomplish more quickly with the SPAC transaction. In terms of current financials, the company generated $19 million in revenue in 2020, of which just $300,000 was annual recurring revenue (ARR). Velo3D is forecasting ambitious growth in the years ahead, estimating that revenue in 2025 will be $546 million, including $213 million in ARR.

Velo3D is preparing to launch its latest printer, the Sapphire XC, in the fourth quarter of 2021. That product has a larger format that is capable of larger build volumes and higher productivity. Customer demand for Sapphire XC is strong, with existing pre-orders already representing the first two full quarters of production. New pre-orders are expected to be delivered in the second quarter of 2022. Sapphire XC has a current backlog of $47.5 million, according to Velo3D.

Time to Buy SPFR? Details of the Velo3D SPAC

The merger gives Velo3D a post-money enterprise value of $1.6 billion, or 3 times estimated 2025 sales. The transaction is expected to close in the second half of 2021, and the combined company will trade under the ticker symbol “VLD.”

The SPAC currently has $345 million in cash, while JAWS Spitfire lined up another $155 million in PIPE (private investment in public equity) financing. Add it all up, and JAWS Spitfire will bring a total of $500 million to the table. JAWS Spitfire’s public investors will end up owning approximately 16.5% of the combined company.

Investor sentiment on the deal has been muted, with SPFR shares dropping 5% after the merger’s announcement. 

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