Stratasys Shareholders to Vote if Nano Dimension Management Replaces Board

As it has attempted to merge with Desktop Metal (NYSE: DM), 3D printing stalwart Stratasys (Nasdaq: SSYS) has faced a number of complications, including a bid from long-time competitor 3D Systems (NYSE: DDD) and attempts at a hostile takeover by Nano Dimension (Nasdaq: NNDM). Now, in a surprising turn of events, Stratasys has announced the agenda for an upcoming general meeting in which its entire Board of Directors is up for vote. Shareholders have the choice to vote either to keep its existing lineup or replace it entirely with management from Nano Dimension. The options are detailed more specifically as follows:

1. Re-election or initial election (as applicable) to Stratasys’ board of directors (the “Board”), to serve as directors for the period from the Meeting until Stratasys’ 2024 annual general meeting of shareholders, and until the due election and qualification of their respective successors, or until their earlier resignation, replacement or removal, of either:
   1. a slate of eight individuals nominated by Stratasys’ Board, consisting of Messrs. S. Scott Crump (a current Stratasys Board member), John J. McEleney (a current Stratasys Board member), Dov Ofer (a current Stratasys Board member), David Reis (a current Stratasys Board member), Michael Schoellhorn (a current Stratasys Board member) and Yair Seroussi (a current Stratasys Board member), and Mses. Ziva Patir (a current Stratasys Board member) and Adina Shorr (a current Stratasys Board member) (collectively, the “Stratasys Slate”); or
   2. a slate of seven individuals nominated by Stratasys’ shareholder, Nano Dimension Ltd. (“Nano”), consisting of Messrs. Yoav Stern (Nano’s Chief Executive Officer), Nick Geddes (Nano’s Chief Technology Officer), Hanan Gino (Nano’s Chief Product Officer and Head of Strategic M&A), Zeev Holtzman (a former Stratasys director), Zivi Nedivi (Nano’s President) and Tomer Pinchas (Nano’s Chief Operating Officer), and Ms. Yael Sandler (Nano’s Chief Financial Officer) (collectively, the “Nano Slate”).
2. Reappointment of Kesselman & Kesselman, a member of PricewaterhouseCoopers International Limited, as the Company’s independent auditors for the year ending December 31, 2023 and for the additional period until the Company’s 2024 annual general meeting of shareholders, and authorization of the Board (upon recommendation of the audit committee of the Board) to fix their remuneration.

Naturally, the Stratasys Board has recommended in favor of re-electing its board. The meeting will take place August 8, 2023, at 3:00 p.m. Israel time, with shareholders able to vote for the fate of the company. 

What Does This Mean?

Numerous questions about, most obvious of which is “how did this come about?” In other words, why would Stratasys allow for such a vote to happen? 

The fact that such a vote is taking place possibly suggests a few things. At the very least, Nano Dimension has enough shares that it has the power to put forth this agenda item. It’s possible that it could have done so back in May, before it made a special tender offering to the public. However, now it likely has more shares through the special tender, as well as potential support from other shareholders. Donerail Group, for instance, has expressed disapproval of Stratasys for not entertaining alternative offers, highlighting that of 3D Systems specifically. 

Nano may have had the ownership ability to request such a vote, but Stratasys may not have had to acquiesced to it. When Nano’s activist shareholder, Murchinson put forth a request for a special shareholder meeting, Nano deemed it unsanctioned and has been fighting with Murchinson about it since. 

With that in mind, it’s possible that Stratasys simply did not want to battle with its own activist investor. Doing so could not only be a legal headache, but one that made the stalwart look weak—unwilling to let a substantial shareholder to advocate for its interests out of fear that it might resonate with the rest of stock owners at large. In this case, the vote could proceed with Stratasys believing it would be unlikely to succeed in replacing the board. Nano’s efforts would look futile and Stratasys could move on. 

This also suggests that Stratasys is confident about the outcome. It is allowing Nano to put forth this vote, believing that it will lose. However, even if Nano loses, the vote could have a negative impact on the existing Stratasys Board and the Desktop Metal merger. If the vote is closer than expected, shareholders could lose confidence and push for Board member changes, a merger with another company, or a cancellation of the Desktop merger. Finally, Nano could win the vote and take over Stratasys. 

Regardless of what happens, things are becoming increasingly complicated and protracted. More news to come.