Leadership Changes and NYSE Compliance Challenges for Velo3D

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As 2024 commences, Velo3D (NYSE: VLD) has been notified by the New York Stock Exchange (NYSE) that its stock prices have dipped below the necessitated standards. This event happened amidst a host of strategic transitions, such as Benny Buller, the founder, stepping down and a project to acquire $18 million by offering new shares. It is noteworthy that Velo3D isn’t the only one facing this predicament as similar notifications have been issued to other entities in the 3D printing sector.

The Continued Listing Standards Notice, which was received from the NYSE on December 28, 2023, highlighted non-compliance with Rule 802.01C. This rule pertains to maintaining the minimum standard average closing price of Velo3D’s stock across a trading period of 30 days. Though alarming, this does not necessarily imply immediate delisting. It merely necessitates prompt action. Consequently, Velo3D has expressed its determination to hold onto its NYSE listing, with plans to inform NYSE within ten business days about its strategy to regain compliance with the listing standards.

Meeting NYSE Standards

Velo3D needs to regain compliance by ensuring the closing price of its common stock is at least $1 on the last trading day of any calendar month throughout the six-month cure period. This is a time allocated to address the stock price issue. Furthermore, the average closing price of the stock should also be minimum $1 during the 30 days leading up to the last day.

For the coming six months, Velo3D is set to continue trading on the NYSE despite a notification suggesting otherwise. This event happens concurrently with major fiscal and managerial transitions in the company. Such challenges extend to include the departure of Benny Buller from his CEO role, a decision instituted by the company’s Board of Directors. This scenario develops during a phase wherein the additive manufacturing (AM) industry is experiencing remarkable economic and organizational transformations. Brad Kreger, the Executive Vice President of Operations, assumes the interim leadership as the company embarks on the search for a permanent CEO. This CEO will expectedly navigate Velo3D into its next growth stage amidst the ongoing industry-wide transformations.

The month of December also saw Velo3D sell an estimated 36 million stock shares at 50 cents each. Expected proceeds from this sale approximated to $18 million before any expenses were deducted. This sale was inclusive of warrants that enabled the buyers to buy more shares at 56.5 cents each, with a validity period of five years. The money raised from the sale of shares has been designated for daily business expenditure, machine procurement, and universal corporate objectives. Notably, Velo3D modified some lending agreements and committed to pay noteholders $25 million. Coinciding with the day of stock sale, this action enables the company to evade paying back a substantial debt portion in early 2024, therefore providing them with more financial flexibility.

A Not So Unique Occurrence

Velo3D is not the first 3D printing business to receive such a notice from the NYSE. Similar notices were issued to Desktop Metal (NYSE: DM) and Markforged (NYSE: MKFG). Both were notified of non-compliance under the same rule, primarily due to their stock prices dipping below the $1 threshold over a 30-day trading period. Like Velo3D, these companies were given six months to regain compliance and are actively working on strategies to fix these issues. One of the common options they are considering is a reverse stock split. This move would reduce the number of shares in the market, ideally increasing the stock price and meeting the NYSE’s requirements.

Apart from Velo3D, the NYSE issued Continued Listing Standards Notices to several companies, including Finance of America Companies (NYSE: FOA), FOXO Technologies (NYSE American: FOXO), and Li-Cycle Holdings (NYSE: LICY). In 2023’s uncertain economic and geopolitical climate, many companies, especially those with low-priced stocks, faced pressure regarding their listing status. According to a recent Bloomberg story, since early 2023, hundreds of small public companies have been at risk of delisting from both the NYSE and Nasdaq for not complying with continued listing requirements, particularly failing to maintain a minimum $1 closing bid price per share for 30 consecutive business days.

Receiving a Continued Listing Standards Notice marks a crucial point for a company on the NYSE. If the problems mentioned in these notices, like low stock prices, aren’t fixed, they could result in something worse: delisting from the exchange. Delisting is a separate process that, unlike the notices, has been observed more frequently.

In December 2023, the NYSE delisted 30 companies. This figure aligns with the trend observed over the past few years, with 41 companies delisted in December 2022, 29 in 2021, 31 in 2020, and 39 in 2019. Calculating the average, roughly 35 companies have been delisted each December from 2019 to 2023. Moreover, the NYSE recorded the highest number of companies delisting between 2020 and 2021, dropping 15.28% year-over-year from 2,873 to 2,434.

Velo3D helps create space technology. Image courtesy of Velo3D.

However, despite the financial headwinds, and as the 3D printing industry evolves, companies like Velo3D are adapting and exploring new pathways to growth and stability. Velo3D, which went public in 2021, initially saw its stock valued significantly higher at its debut, close to $10. But since November 22, 2023, the company’s stock has been trading below the $1 mark. As of the second week of January 2024, Velo3D’s stock value further declined, trading at under 40 cents. This situation underlines the volatility and challenges in the stock market, particularly for emerging technologies like 3D printing.

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