Essentium’s public listing fell through when it became clear that the company’s share value would not be above the threshold to receive sufficient PIPE funding six months after its SPAC transaction closed, according to co-founder Blake Teipel.
Appearing on TCT’s Additive Insight podcast, Teipel – who is now Chief Strategy Officer at Nexa3D after the two companies merged – spoke candidly about Essentium’s failed bid to become a publicly listed company in 2022. The termination of Essentium’s business combination with Atlantic Coastal was among the biggest stories of 2022 and came after several other AM companies – including Desktop Metal, Markforged and Velo3D – had successfully listed on public stock markets via SPAC transactions.
Essentium failed to become a publicly listed company due to a decline in market conditions. It had long been part of the company’s plan to pursue a public listing, but that ambition was accelerated after the Covid-19 pandemic hit. The company found itself in a position whereby it needed to raise money to safely see the business through the other side of pandemic, and with a portfolio of hardware solutions launched and contracts with the US Government now live, Teipel started to receive inbound requests from large investment banks to invest in Essentium. It steered Essentium down the road of pursuing a public listing and pitching to prospective SPAC organisations, which are set up as ‘bank accounts’ that need to find a private entity to merge with before listing on the stock exchange. By the time these pitches were taking place, the market was trending downwards.
“We finally had a SPAC partner signed up in August [2021],” Teipel explained. “Unfortunately, though, what happened was these first companies that went out – Desktop [Metal] went out in the fall of 2020, Nano Dimension went out in the fall of 2020, Velo3D and Markforged went out in the spring of 2021 – every single one of those public securities were deteriorating in value. And they were not deteriorating just a little bit, they were deteriorating a lot.”
Because of market conditions, Essentium was finding it hard to subscribe its pipe (public interest in private equity), and hard too to convince SPAC firms that there was room for another AM company to go public at that time. Though Essentium would argue its way successfully through these concerns, it slowed proceedings down, and the market continued to trend downwards. Across industries, SPAC deals were falling through, and for AM specifically, share values were dropping from around 10 USD per share into the low single figures.
Teipel compares it to buying a 1 million USD house – you wouldn’t go through with that purchase if the value of the other houses in the neighbourhood were dropping by 50% or more. How that works in a public market is investors start to take their money out at, for example, 10 USD a share because those shares will be even less tomorrow, and the next day, and so on. So, share values are trending downwards, and the chances of Essentium receiving the funds from its PIPE structured capital – released six months down the line if its share value is above 5 USD per share – was dwindling.
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“We were staring the down the face of a public market transaction knowing we were going to be undercapitalised and not have the money we needed to go out and achieve the admittedly ambitious business plan that had used to raise all this capital,” Teipel said. “That was that. It was the entire name of the game. During that period of time, all God’s children were fundraising this way. If you could, you were doing it. Everybody believed in their growth model because they believed they would have enough money to go out and buy the growth.”
The crash in value, however, meant Essentium pulled out of the SPAC transaction in early 2022 because “none of the fundamental economics were still in place for public markets at that time.” From there, Essentium had to restructure the business, place a focus on the application areas that had got it into a position to even consider going public in the first place, and find what it deemed to be the right partner to merge with. By the end of 2023, that turned out to be Nexa3D, with their business combination completing in early 2024.
