3D Systems Corporation (NYSE:DDD) shares tanked as much as 10.95% on Wednesday to close at $50.44 after the company announced a secondary offering of 5.95 million shares. 3D Systems expects to raise $317 million from the secondary offering. The Rock Hill, South Carolina-based company has also given underwriter Canaccord Genuity a 30-day option to buy up to 892,500 additional shares. That would take the total gross proceeds to $370 million.
3D Systems picked a poor time for the offering
Analysts say that the offering came at a poor time. Shares of 3D Systems Corporation (NYSE:DDD) have tanked more than 41% since their January high of $97.28. It indicates that investors already doubt the Rock Hill-based company’s ability to make right investments and return value. The offering came just as the stock has started recovering, and pulled it further down. The secondary stock offering will dilute existing shareholders by about 6%.
3D Systems Corporation (NYSE:DDD) said it will use the proceeds to finance future acquisitions, and for general corporate purposes. The 3D printing company has a history of acquiring smaller rivals, modeling companies and sales partners. In April, it purchased Brazil-based Robtec to expand its business in Latin America.
Pacific Crest Securities analyst Weston Twigg said in a research note Wednesday that the latest offering only reinforces investor fears that 3D Systems Corporation (NYSE:DDD) is growing mostly through acquisitions. The research firm is still bullish on the stock with its Outperform rating. But Pacific Crest reduced its price target from $65 to $59.
3D Systems Corporation (NYSE:DDD) already has $295 million in cash, and it’s cash flow positive. So, there is little need for additional capital, says Weston Twigg. If the company is gearing up to make a big acquisition, it will do little to alleviate investor concerns that the company is growing primarily through acquisitions. Over the last four years, 3D Systems has acquired 45 companies for a total of $520 million. And the latest capital raise signals that more acquisitions are on cards.
3D Systems facing threats from all corners
3D Systems Corporation (NYSE:DDD) is facing multiple threats. Hewlett-Packard Company (NYSE:HPQ) has announced that the company will enter 3D printing business by the end of this year. Global Equities Research analyst Trip Chowdhry said in a research note last month that tech heavyweights Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG) are also working on All-In-One 3D printing technologies for consumers. Meanwhile, another startup M3D has pre-sold 11,000 units of 3D printers at $299. That price tag is far below what 3D Systems charges for similar products (well above $1,000).
3D Systems Corporation (NYSE:DDD) shares sank another $0.48% to $50.20 in pre-market trading Thursday.