Velo3D (VELO)

* VELO’s refinancing and insider confidence

VELO has had a rough go of it. They announced a SPAC merger right at the height of the SPAC bubble in early 2021 projecting half a billion in revenue in 2025. Revenues for the first nine months of 2025 were ~$36m; I suppose it’s possible they had a massive Q4 and hit those projections, but I think it’s safe to say the company hasn’t exactly lived up to its SPAC promise.

However, just because a company has been a disappointment in the past does not mean the stock can’t do well going forward (at least that’s what I tell myself about at least half of my portfolio), and VELO’s insiders certainly seem somewhat bullish. VELO’s recently retired most of their debt by converting it to equity. A debt to equity conversion is not abnormal; what is abnormal is that Velo did the conversion with insiders and did it at two different prices. One director owned ~$10m of notes and converted at $10.50/share (roughly the market price of the stock), while the CEO went out at bought $5m of notes and then converted it to equity at $16.38/share.

That is a fascinating transaction; I’d be really curious how the CEO came up with the $16.38/share number. Whatever the reason, you have to think the CEO is bullish on the company’s stock to make that switch at that premium (and the CEO would be happy to tell you he’s bullish; as part of the PR he noted, “My decision to acquire and convert this debt at a significant premium to market reflects my belief in the long-term value of Velo3D," ).

One last note on VELO: in February, the CEO got a stock option grant that doesn’t kick in on the low end until the company hits a $1B valuation and, on the high end, until the company hits a $10B valuation.

A cynic might note that hitting a valuation target isn’t necessarily hard if a company issues enough stock or goes ham on stock-for-stock acquisitions…. but that’s a story for another post. What’s important for this post is that a director converting debt to equity is already bullish…. but a CEO then buying debt and converting it to equity at a massive premium is so wildly bullish you wonder if it’s setting something else up…..