Jaws Spitfire Acquisition Corp. (SPFR) SPAC is taking Velo3D public in a deal valuing the 3D printing manufacturer at $1.6 billion. The merger deal is expected to close in the second half of 2021. Is SPFR stock a buy before the Velo3D merger date?
After the transaction closes, SPFR SPAC investors will own 16.5 percent of Velo3D, while PIPE investors will own 7.4 percent. SPFR SPAC stock is up 1.8 percent from its IPO price of $10 per share. However, the stock is still down 15.9 percent from its 52-week high of $12.10.
SPFR SPAC’s sponsors
In its December 2020 IPO, the SPFR SPAC offered 30 million shares for $10 each. SPFR’s sponsor is Spitfire Sponsor LLC. The SPFR SPAC is led by Chairman Barry Sternlicht. Sternlicht is the founder and CEO of Starwood Capital.
SPFR SPAC and Velo3D merger date
The SPFR and Velo3D merger is expected to close in the second half of 2021. The transaction, subject to approval by SPFR shareholders and other customary closing conditions, is set to have a pro forma enterprise value of $1.6 billion. After the transaction closes, the combined entity will trade on the NYSE under the ticker symbol “VLD.”
Under the terms of the deal, Velo3D will receive about $500 million in cash proceeds to pursue its growth plans. The cash includes $345 million held in trust by SPFR and $155 million in PIPE at $10 per share. The PIPE investment is led by institutional investors, including Baron Capital Group and Hedosophia. Existing Velo3D shareholders are set to own 71.9 percent of the combined entity when the transaction closes.
Cathie Wood buys SPFR SPAC stock before merger
Velo3D isn’t profitable.
Velo3D isn't profitable yet. The company has experienced net losses each year since its inception. Velo3D anticipates that its negative cash flow and net losses will continue for the foreseeable future as its expenses rise. The company expects to turn EBITDA positive in 2023.
Is SPFR stock a good buy before Velo3D merger date?
Founded in 2015, Velo3D supplies 3D printers to Elon Musk’s SpaceX, Honeywell, and Boom Supersonic. The company expects to report total revenue of $26 million in 2021 and forecasts that number to grow to $89 million in 2022 and $546 million in 2025. Velo3D thinks that its total addressable market opportunity is more than $100 billion.
SPFR valued Velo3D at a pro forma implied equity value of $2.09 billion. Meanwhile, at SPFR’s current stock price, Velo3D is valued at around $2.12 billion. After adjusting for its pro forma $472 million net cash, it would have a pro forma enterprise value of $1.65 billion.
Based on this enterprise value and Velo3D’s projected total revenue, its valuation multiples for 2021, 2022, and 2023 are 63.5x, 18.5x, and 10.2x, respectively. The company’s 2025 EV-to-sales multiple of 3x looks much more attractive. Velo3D’s peers Desktop Metal and AMETEK are trading at NTM EV-to-sales multiples of 27.5x and 6.7x, respectively.