Desktop Metal — The next $10+ billion company (2024)

Boston-based startup Desktop Metal is bent on disrupting the metal 3D printing industry. It could become a major player in the Fourth Industrial Revolution.

Boston-based startup Desktop Metal is bent on disrupting the metal 3D printing industry and manufacturing at large. Desktop Metal offers the fastest metal 3D printing technology in the market, up to 100x the speed of legacy technologies.

It announced today that it will combine with the SPAC Trine Acquisition Company (NYSE: TRNE) lead by Leo Hindery with a post-transaction equity value of up to $2.5 billion and will remain listed on the NYSE under the ticker symbol “DM” following expected transaction close in the fourth quarter of 2020.

The transaction provides up to $575 million in gross proceeds, comprised of Trine’s $300 million of cash held in trust (assuming no redemptions) and a $275M fully committed common stock PIPE at $10.00 per share, including investments from Miller Value Partners, XN, Baron Capital Group, Chamath Palihapitiya, JB Straubel, and HPS Investment Partners.

3D printing, also known as additive manufacturing, is a revolutionary platform technology that could enable the Fourth Industrial Revolution.

Building objects layer-by-layer is a stark contrast to traditional manufacturing techniques. They either shave material away from a larger block or require a mold to shape parts. According to ARK Invest, additive manufacturing offers a range of benefits:

• Production becomes more adaptable and less labor-intensive.
• Product design is freed from manufacturing constraints and can accommodate greater complexity with little to no additional cost.
• Products become more customizable with performance metrics a closer match to end-use-requirements.

Although there are already some public organizations that use additive manufacturing solutions, Desktop Metal will become the only listed pure-play additive manufacturing company.

The investment thesis can be stated as follows:

Desktop Metal (NYSE: TRNE) offers an asymmetrical risk-opportunity to bet on the Fourth Industrial Revolution with a world-class technical management team and well-known investors (1), disruptive technology platform (2), in a large and fast-growing total addressable market (3), with the optionality to expand vertically via acquisitions (4) while being attractively valued (5).

Desktop Metal has earned its prior investor confidence based largely on two factors: an all-star crew of 3D printing scientists and its disruptive technologies.

Their team includes Ely Sachs, who invented the paradigm-shifting “binder jetting” process in 1988, Paul Hoisington, who invented the “single-pass inkjet” technique for the 2D printing industry, and leading metallurgy experts Chris Schuh and Aminesh Bose. Altogether, they hold hundreds of patents and a high number of PhDs and professorships. Exactly the team that you would like to assemble to make a better metal 3D printer.

This has attracted many famous venture capital investors such as Kleiner Perkins, NEA, GV (formerly Google Ventures), and Lux Capital and many industrial companies such as Koch Disruptive Technologies, Panasonic, Techtronic, Ford, BMW, and GE Ventures to invest over $438 million in Desktop Metal, including a $160 million investment round at a $1.5 billion valuation in January 2019. This shows a lot of confidence in the business opportunity.

With the $275M PIPE investment this stellar team is joined by long-term investors Miller Value Partners, XN, Baron Capital Group, Chamath Palihapitiya, JB Straubel, and HPS Investment Partners. Bill Miller is an infamous value investor, Ron Baron is known for his long-term holding strategy. Chamath Palihapitiya made SPACs popular through IPOA that merged with Virgin Galactic (NYSE: SPCE) in October 2019. JB Straubel was the inaugural chief technical officer at Tesla.

The company has introduced so far two 3D printers: a smaller Studio System and the industrial-sized Desktop Metal Production System (currently only at selective customers). It will ship a Fiber solution and a mid-sized Shop System at the end of 2020 and the Desktop Metal Production System will be shipped in volume in the second half of 2021.

Desktop Metal’s Production System industrial-sized 3D printer is the culmination of its substantial development. It’s driven by a new printing process the startup calls Single Pass Jetting (SPJ), a faster version of the typical binder jetting process found in current powder-based ceramic and metal printers.

Harnessing SPJ and other optimizations in materials and post-processing, Desktop Metal claims the Production System is up to 100x faster than the most common method for metal 3D printing (SLS) and up to 20x cheaper.

The company identifies its solutions as “Additive Manufacturing 2.0”. This new wave enables key innovations across printers, materials, and software and pulls additive manufacturing into direct competition with conventional processes used to manufacture $12 trillion in goods annually.

With the right price competitiveness and speed and efficiency gains, Desktop Metal Production System could disruptive the additive industry. The barriers to entry are high as the company has over 120+ patents issued or pending.

The additive manufacturing industry is expected to grow 11x over the next decade from $12 billion in 2020 to $146 billion in 2030. This represents an impressive compound annual growth rate (CAGR) of 25%.

This shift is caused by using additive manufacturing not only in prototyping but also in mass production. Furthermore, strong secular tailwinds around re-shoring manufacturing and supply chain flexibility demand additive manufacturing processes. Ric Fulop, CEO of Desktop Metal, explains the shift as following:

“Before it was more expensive, so it was very difficult to get products made cost-effectively and it only made sense for prototyping. We actually have the ability to do it at scale, and to do it in a really high throughput way.” — Ric Fulop

Desktop Metal sees a vast opportunity to accelerate its growth trajectory with acquisitions of high-potential companies in the additive manufacturing market. The company claims that it has already identified $2B of inorganic revenue across 60+ potential targets. With over $625M (pro forma) on the balance sheet, the company has the optionality to enhance growth, profitability, and diversification.

Desktop Material’s valuation is currently reasonably attractive as its enterprise value is just the multiple of 1.9x 2025E revenue and 6.8x 2025E EBITDA. Much lower than the average of comparable public companies. Moreover, the company has no outstanding debt and close to $625M on its balance sheet. This provides an investor with a sufficient margin of safety.

Boston-based startup Desktop Metal is bent on disrupting the metal 3D printing industry. They could lead the way for the Fourth Industrial Revolution.

Currently, Desktop Metal (NYSE: TRNE) offers an asymmetrical risk-opportunity to bet on the Fourth Industrial Revolution with a world-class technical management team and well-known investors (1), disruptive technology platform (2), in a large and fast-growing total addressable market (3), with the optionality to expand vertically via acquisitions (4) while being attractively valued (5).