A report this week suggests that XJET has stopped its planned initial public offering.
The “IPO” is a process by which the company would appear on a stock market for public trading. That would make the firm far more visible, as their financials would then be published. It could also raise cash for the company, as that’s typically why IPOs are undertaken.
However, things are a bit different here. In May the company filed documents intending to IPO, but offering only a small number of shares totaling US$6.4M. That might sound like a big number, but according to Crunchbase the company has already received US$79M in private investment, with some reports of even higher private investments.
Why do a teeny IPO of this nature? One reason I could think of would be to establish the true public value of the company. The value of any company is determined by the price bid by public investors, usually on a stock market. By offering a small number of shares, XJET could have “set” the price for shares, and the investors would then have some idea of what their investment is really worth these days.
That may all sound strange, but here we have an unusual situation: the publicly traded 3D print companies we track on our weekly leaderboard have all been in the tank for a couple of years. Their valuations have plummeted, in many cases by 90%. Several companies have literally disappeared.
For a private company investor, that situation presents a question: what would their investment be worth given the public market turmoil? I could see this as a possible reason for an IPO, although it does seem like a lot of effort.
It could also be that the company requires cash, and an IPO is one way of raising cash, perhaps for operations or for an acquisition.
However, all of that was for nought, as the company has apparently withdrawn the application to NASDAQ. There is scant reporting on this, so it’s unclear why XJET stopped the IPO. One reason could be that investor take up was lower than expected. That could indicate the price of the shares offered was too high, suggesting their internal valuation could be wrong.
It sounds like it’s back to the drawing board for XJET.
Via MarketWatch
