Is the Galileo SPAC a good investment for Ark?

3D printing has come a long way. Just last week a Dutch couple, Elize Lutz and Harrie Dekkers, became Europe’s first tenants of a fully 3D printed house.

The house was built in five days, using cutting-edge technology to accelerate production — the potential implications for the future of home building are huge.  

A 3D-printed house making headlines is a reflection of the increased attention digital manufacturing is getting. Ark Invest’s 3D Printing ETF [PRNT] is up 19.98% so far in 2021, and 98.25% over the past 12 months (as of 5 May’s close). According to Shapeways — a world leader in 3D printing — the digital manufacturing market could grow from $39bn in 2021 to $120bn by 2030.

  

Shapeways itself announced yesterday (5 May) that it has confirmed a deal to list via a merger with the Galileo Acquisition Corp [GLEO] SPAC. The deal gives Shapeways a $410m valuation, along with access to $195m in net proceeds, including $75m private investment in private equity (PIPE), and with backers including Desktop Metals [DM].

The combined company will be called Shapeways Holdings, trading under the ticker SHPW, and Shapeways’ current CEO, Greg Kress, will remain in his post.

"Ultimately going public will accelerate a lot of the goals that Shapeways wants to attain. The public validation of our business will help accelerate the growth of our company," Kress said in an interview with Reuters.

“Ultimately going public will accelerate a lot of the goals that Shapeways wants to attain. The public validation of our business will help accelerate the growth of our company” - Shapeways’ current CEO, Greg Kress

 

Why should investors care about the Shapeways SPAC?

Never one to miss out, Cathie Wood’s Ark Invest has picked up 506,397 shares in Galileo through its ARK Autonomous Technology & Robotics ETF — but why should investors care?

Well, Shapeways is a leader in the digital manufacturing industry. It helps engineers turn digital designs into physical objects through its software and 3D printing technology. The company says it has over one million customers worldwide, has produced more than 20 million printed parts and has delivered to 160 countries. Shapeways will use funds raised from the merger to continue its expansion and to invest in its technological offering.

3D Printing Media Network, an industry publication, reckons Shapeways is well-positioned to benefit from the projected growth in the 3D printing market, thanks to an operating system that is “agnostic to hardware technology and materials”. This allows the company to quickly respond to changing market and user demands.

Beyond its US and European markets, there is growing opportunity in Asia — China is by far the world’s biggest manufacturing hub. Shapeways is also entering into strategic partnerships with Desktop Metal and has licenced an SaaS version of its operating software.

 

Is Shapeways a good investment?

In the presentation covering the merger, Shapeways claims to have a “clear path” to grow its revenue 12-fold.

Shapeways’ 3D printer is forecasting 66% revenue CAGR until 2025. That would represent $400m — less than 1% of the total addressable market. Adjusted EBITDA is forecast at $107m, while GM per customer is forecast to grow at over 30% in the same timeframe. Shapeways made $32m in revenue in 2020, with adjusted EBITDA coming in at a $2m loss, so these forecasts represent a substantial jump in both revenue and earnings. The presentation also identified $150m in near-term revenue opportunities.

  

By 2025, Shapeways expects to diversify its revenue stream beyond how it makes money today, which it calls its “core customer segment”. In Shapeways’ projections, this would account for 25% of revenue by the middle of the decade, with Shapeways Software and Manufacturing and new additive manufacturing starting to bring in revenue too.

Just how much upside there is depends on Shapeways listing price, the market for 3D printing when it does list and whether the revenue projections are realistic. It’s also important to remember that Shapeways is not the only 3D printing SPAC out there, with the upcoming merger of Velo3D and the Jaws Spitfire Acquisition Corp [JWS] SPAC on the horizon — Ark Invest is backing this one, too.