Shapeways’ $605M SPAC deal: all hype or a recipe for revenue growth?

Back in April 2021, 3D printing service provider Shapeways announced its intention to go public via a merger with Special Purpose Acquisition Company (SPAC) Galileo Acquisition Corp (GLEO). 

At the time, the company’s CEO Greg Kress described the deal, which will see the creation of a new enterprise with a total equity value of $605 million and a $195 million warchest, as “a significant milestone,” that effectively generates the funding it needs “to empower digital manufacturing at scale.” 

The proposed IPO is the latest in a string of recent SPAC mergers announced by 3D printing firms, and takes the grand total of these deals over the $13 billion mark, but Shapeways’ financials, or rather absence of, also pose serious questions about its past performance and long-term profitability. Between FY 2019 and FY 2020, the company’s revenue declined 5%, yet it’s now projecting rapid annual growth of 95% between FY 2021 and FY 2022. 

Investors have also backed Shapeways with $100 million since 2007, but there’s little on the firm’s balance sheet to specifically show where the funding has been invested, whether in property or equipment.

Shapeways reported net losses of $7 million in FY 2019 and $3 million during FY 2020, as well as adjusted EBITDAs of -$6.1 million and -$2.4 million, thus it’s worth questioning whether Galileo has bought into 3D printing’s renewed hype, or if Shapeways is genuinely positioned to meet its pre-tax earnings target of $107 million by 2025. 

To find out more about the firm’s expansion plans, 3D Printing Industry reached out to a Shapeways spokesperson, who said that the funding raised via its upcoming SPAC merger will allow it to “accelerate its additive manufacturing capabilities,” and “fuel its drive towards sustained double-digit growth.”

“We feel it is not about where you start, it’s about where you finish,” said the spokesperson. “Successful businesses know they are running a marathon, not a sprint, and we have lots ahead of us. We like where Shapeways is now, poised for tremendous growth and innovation.”

Shapeways 3D printing factory. Photo via Shapeways.
Shapeways is set to go public by merging with Galileo Acquisition later this year. Photo via Shapeways.

Journeying towards a $605m IPO 

Founded as a spin-off of Phillips in 2007, Shapeways initially incorporated two very different businesses: an online marketplace for designers, and a suite of on-demand manufacturing services. Eventually, the company’s ambitions for the former fell flat, causing it to change direction with the appointment of CEO Greg Kress, who pledged initially to make the firm’s platform a place to “design, make and sell.”

Since then, Shapeways has focused on expanding its service offering, adding Carbon’s DLS technologies to its portfolio in February 2019, before integrating ZVerse’s software to optimize the performance of its online platform. By iteratively scaling its production capabilities, the firm has managed to broaden its potential audience, and recently reached a 20 million printed part milestone

However, the firm now operates in an increasingly crowded market, with the likes of Xometry and the recently-rebranded Hubs, starting to carve out a niche for more professional clientele, while Hubs owner Protolabs is investing heavily in its CNC machining capabilities, and each of these companies is effectively competing for the same customers as Shapeways. 

As a result, the firm’s decision to undergo a SPAC merger can be seen as a valid move to raise the funding needed to remain competitive against its market rivals, but there appears to be little in the deal for Galileo. Although Shapeways has always traded privately and not published its full financials, it did release some top-line figures last month. However, Shapeways was unwilling to provide specific financial information requested by 3D Printing Industry.

Shapeways’ Projections ($)FY 2019 FY 2020 FY 2021FY 2022FY 2023FY 2024
Revenue 33.5m31.8m44m86m150m250m
YoY Growth (%) -5+38+95+74+67

Shapeways’ opaque financials  

Upon his appointment as CEO, Kress managed to raise $30 million for the company in an investment led by Lux Capital, which took its total funding since 2007 to over $100 million. However, when Shapeways published its balance sheets in April 2021, they revealed that as of December 31 2020, it had $948,000 in property and equipment, raising questions over where this $100 million was invested. 

Shapeways did not disclose exactly where the capital has been spent, but it’s possible that it was invested in assets that have since depreciated, or that the funds have simply covered its operating expenses. Either way, without knowing where the initial $100 million was deployed, there’s little evidence that the $195 million set to be raised by its upcoming merger will be invested any differently, or into assets that appear on its future balance sheets. 

Given that the firm’s revenue declined from $33.5 million in FY 2019 to $31.8 million in FY 2020, its guidance of $86 million for FY 2022 also seems on the optimistic side. While Shapeways has said that its upcoming investment will enable it to “unlock new industries” and “capitalize on favorable market tailwinds,” it remains to be seen whether the company’s leadership will invest in the right areas to make this happen. 

Shapeways’ current management has overseen the spend of at least $30 million of investors’ cash, and having failed to generate growth, there’s no guarantee they’ll be able to buck this trend and guide Galileo, whose backers appear inexperienced in the 3D printing industry. For its part, the company has now stated that its leadership team “brings significant entrepreneurial and industry expertise to propel the company forward.” 

Responding to this point 3D Printing Industry were told, “CEO Greg Kress is an innovative and results-driven leader who brings strong supply chain and commercial operations expertise from his role as a member of GE’s corporate leadership. Jennifer Walsh, CFO and COO, is a veteran finance executive and Miko Levy, CRO, has a proven track record of driving aggressive business growth.”

A range of components that were 3D printed using Shapeways' existing online platform. Image via Shapeways.
Shapeways issued forward-looking financial guidance during a presentation in April 2021. Image via Shapeways.

3D printing’s SPAC IPO trend

Once completed in H2 2021, Shapeways’ merger will see Galileo become the seventh SPAC to enter the industry in the last year, but there’s no guarantee that the resulting enterprise will yield immediate profitability or that its stock will capture the interest of investors, thus there’s a risk that it has bought into a trend rather than the firm’s future growth potential.  

Desktop Metal seemingly started the industry’s SPAC IPO boom last year, when it merged with Trine Acquisition and went public in December 2021, raising $580 million in the process. However, the company’s shares didn’t immediately take-off upon their listing on December 10 2020, since falling in value by a third, thus proving that generating investor interest in 3D printing stocks remains a challenge to industry IPOs. 

Elsewhere, VELO3D, Rocket Lab, Markforged, Bright Machines and Redwire have all announced their intentions to go public via SPAC mergers later this year. While the short-term performance of shares is by no means a firm indicator the long term prospects of a company, the performance to date of Desktop Metal stock does at least raise questions over whether 3D printing’s SPAC IPO trend will be long lasting, or a flash in the pan followed by collapse in interest, akin to that seen in 2014.  

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Featured image shows some of the decor inside Shapeways’ 3D printing factory in Eindhoven. Photo via Shapeways.