As the announcement of a merger between Stratasys (Nasdaq: SSYS) and Desktop Metal (NYSE: DM) took the 3D printing industry by surprise, subsequent developments have propelled the drama even more. Just days after the companies revealed their plans, Stratasys received a bid from its long-time competitor, 3D Systems (NYSE: DDD). At the same time, another development occurred that may have been lost on the general media. On May 30, 2023, Iranian-American billionaire Farhad “Fred” Ebrahimi acquired 23,881,002 shares, about 7.43%, of Desktop Metal, filing as an activist investor.
Who is Fred Ebrahimi?
Since then, on June 5th, 2023, Ebrahimi sold half-a-million shares, according to a Schedule 13D form filed with the U.S. Securities and Exchange Commission (SEC) on Friday, June 9, 2023. Nevertheless, he still owns 7.26% of Desktop Metal, more than the next largest institutional investors, Vanguard and Blackrock, who have 6.94 and 6.5% of the company.
Ebrahimi made his fortune as the founder of enterprise publishing software company Quark Software. In 2011, the Ebrahimi family sold its shares to California-based private equity firm Platinum Equity. Since then, Ebrahimi has invested in medical imaging firm ViewRay, Inc. and First Solar, Inc., a leading solar panel manufacturer with a $20-billion market cap. He is also a significant contributor to development projects in India, where he has established a 50-acre planned community called Quark City.
Now that he is the leading investor in Desktop Metal, he will have an outsized influence on how the company handles possible merger activity with Stratasys. Ebrahimi is said to be friendly with Desktop management and in favor of the merger. This is just one of a number of complex details related to the merger, which also includes a recent class action lawsuit lodged against Desktop Metal on June 6, 2023 by a retirement fund, Building Trades Pension Fund of Western Pennsylvania, with shares in the company.
Lawsuit against Desktop Metal
The suit is the result of Desktop Metal adopting a “poison pill” strategy in order to prevent issues related to a hostile takeover pursued by Stratasys investor Nano Dimension. The plan would see a poison pill triggered if any “stockholders collectively owning 15% or more of the company’s shares enter into any agreement, arrangement, or understanding concerning voting, including with respect to voting on whether or not to approve the merger.” The lawsuit claims that the poison pill “unduly restricts basic elements of corporate democracy,” with no fiduciary out or right to terminate the deal if a better offer were to come through.
“Desktop Metal stockholders should be allowed to freely discuss amongst each other and reach understandings concerning whether the proposed merger is fair and in the best interests of Desktop Metal and its shareholders — particularly because the board has given away its ability to accept a superior proposal,” Building Trades wrote in its complaint.
Other Drama
At the same time, there are ongoing legal battles between Stratasys and Nano Dimension, as well as between Nano Dimension and its largest institutional investors, Anson Funds Management, Murchinson Ltd, and Boothbay Fund Management. Whatever happens in relation to these issues could have an impact on a potential merger. Because Ebrahimi is said to be in favor of the merger, he could aid in its completion against any obstacles.
The exact outcome of all of this is obviously yet to be determined, but the results could have an outsized impact on the 3D printing industry. Right now, the additive manufacturing (AM) sector is receiving a significant boost from national governments looking to make their supply chains more resilient and less carbon intensive. As Stratasys is one of the most important firms in the industry, what becomes of it will have knock-on effects throughout manufacturing now and going forward.
Feature image courtesy of the Indian Express.