Markforged has made a decision about its stock split.
The company, along with several others in the 3D print space, has suffered a decline in valuation over the past years. We track the valuations of publicly-traded 3D print-related companies in our weekly leaderboard, and we’ve seen this decline occur week after week.
In the case of Markforged, the company entered the stock market in July 2021 with a weekly valuation of US$1.95B. That was the peak valuation of Markforged, it turned out, as the valuation steadily dropped since inception. As of last week, Markforged’s valuation on the leaderboard was only US$45M, representing an incredible loss of 97% of the initial value.
That’s obviously not good news, but there are some specific effects of this slide that put Markforged in an awkward position.
One effect is that the company’s stock price has fallen below US$1, which is the minimum threshold required by the NYSE. Were Markforged not be able to raise their stock price, they would be booted off the stock exchange, which would put an even larger dent into their valuation because fewer investors could access the stock.
There are two approaches to resolve the situation. First, the company can try to boost their valuation through better corporate performance. I’m sure Markforged has attempted to do so, but they faced a challenging market where multiple 3D print companies have lost value.
The second approach is a paperwork exercise. The idea is to collapse the number of shares to boost the stock price. For example, if they swapped every two shares for one, the stock price would be doubled, since there are half the number of shares.
In practice, however, this doesn’t always work. The need to do the maneuver alone tends to sour investors on the company, so you likely wouldn’t get quite double the stock price.
Back in June Markforged’s stockholders made the decision to implement a reverse stock split to resolve the issue with NYSE. That decision allowed Markforged management to determine what level of reverse stock split to take, something between five and ten to one.
Now we’ve learned that the decision was to go for a ten to one reverse stock split: 4000 shares becomes 400 shares, etc.
A reverse stock split in itself does not affect the company’s valuation: there’s just a smaller number of stocks to split up the valuation.
However, because of the effect I described above, the announcement will surely cause some sentiment changes among investors.
As of this writing, Markforged’s valuation has dropped five percent or so, and we’ll be interested to follow what happens in succeeding days.
This move, which takes effect later this month, will allow Markforged to remain on the stock exchange, and hopefully give them the time to turn things around.
Via Markforged
