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What happened
Actions of Materialize (NASDAQ: MTLS), a provider of 3D printing software and services, fell 10.7% in June, according to data from S&P Global Market Intelligence. The catalyst for the decline was the announcement by the Belgium-based company that it was issuing Additional U.S. Depository Shares (ADS) to raise funds.
For the context, the S&P 500 the index returned 2.3% last month, while shares of other 3D printing companies 3d systems and Stratasys increased by 35.9% and 12% respectively.
Image source: Getty Images.
So what
On June 10, Materialize shares fell 18.3% following the company’s announcement of a public offering of 4.0 to 4.6 million ADS at $ 24 ADS. In Belgium, each ADS represents one ordinary share.
Investors don’t like their ownership of a business to be diluted – and the dilution here is around 7.9%. Additionally, the offer price of $ 24 was 14.3% lower than the share’s closing price the day before the announcement. It was therefore to be expected that the title will drop on the news. (Unsurprisingly, the stock’s most recent closing price was very close to the new offer price; it was $ 24.05 on Friday, July 2.)
The half-full glass is that the offering is expected to generate approximately $ 96 million to $ 110 million in proceeds minus the costs associated with the offering. That money could almost entirely pay off the company’s debt, which stood at $ 110.4 million at the end of the last quarter. Of course, the company might also want to have more cash so they can pounce on an attractive acquisition candidate.
Now what
Materialize is not currently profitable nor is it expected to be for 2021. However, Wall Street expects the company to return to profitability, on an adjusted basis, next year.
The stock deserves a spot on the 3D printing investor watchlists, as I recently wrote in a 3D Printing Stock Insight as the end of the first half of 2021 approaches.
This article represents the opinion of the author, who may disagree with the “official†recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.
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