What happened

After climbing nearly 2% on Monday in the face of an ominous note from Wall Street, bad news is catching up to Desktop Metal (DM -8.05%) today. Shares of the 3D printer company declined 6.4% through 10 a.m. EDT Tuesday morning.

3D printer

Image source: Getty Images.

So what

Monday morning, TheFly.com cited analysts from Lake Street Capital warning of "intensifying competition," a high stock valuation that is about three times more than its peers, and an imminent expiration of the lockup period on a ton of new shares. Together, these factors threatened Desktop Metal's stock price, Lake Street warned, and advised investors to sell the stock.

Let's take those one at a time, beginning with competition. Desktop Metal has only been in business for six years, so it's a relative newcomer next to rivals Stratasys (SSYS -3.35%), which was founded in 1989, and 3D Systems (DDD -5.61%), established in 1986. It's also a newcomer to the public markets, having come public in a SPAC-sponsored IPO only last year.

Yet despite its shorter track record, Desktop Metal stock sells for more than 150 times sales (it has no profits), versus Stratasys's 2.5 P/S ratio and 3D Systems' 6.4. So the valuation situation is arguably even worse than Lake Street makes it appear.

Now what

None of the above is exactly news. Here's what changed this week to send Desktop Metal stock down: Last month, it filed a prospectus with the Securities and Exchange Commission regarding "the resale, from time to time," of 192.7 million shares of common stock held by its shareholders, and of 25 million warrants that could become new shares if exercised.  

Lake Street estimated that these new shares would come pouring into the market yesterday, June 7, as the lockup period on their resale expired. And the analyst warned that this could push Desktop Metal's stock price low -- exactly what seems to be happening today.