Nano Dimension Management Slings Mud at Stratasys Board, Threatens Stock War

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As mergeracolypse heats up around the 3D printing industry’s most valuable company, Stratasys (Nasdaq: SSYS), the firm’s most hostile suitor, Nano Dimension (Nasdaq: NNDM) has begun pulling out the big guns, bringing up allegations against the Stratasys Board of Directors and threatening to sell all of its shares, representing 14.1 percent ownership of the company.

Earlier in the month, Nano Dimension’s management forced the introduction of a measure to potentially vote out the Stratasys Board and replace it with its own at Stratasys’s August 8th, 2023 Annual General Meeting. Stratasys argued that this move would allow the Nano team to possibly reneg on investors who participate in Nano’s partial tender offer. Meanwhile, Nano has continued to increase the price of that tender offer, most recently upping the price to $25 per share in cash in an effort to outbid 3D Systems (NYSE: DDD), with whom Stratasys is entering talks for a potential merger, thus likely cancelling the existing merger deal Stratasys has with Desktop Metal (NYSE: DM).

The stock performance of all four companies as of this article’s writing on July 18, 2023.

Nano Dimension’s Accusations

To add gas to the fire, Nano’s management has since published a press release airing out dirty laundry associated with the members of the Stratasys Board. These range from mere accusations of poor management, nepotism, and self-enrichment to outright criminal activity. In the case of Board Chair Dov Ofer, for instance, Nano Dimension suggests that Lumenis Ltd. performed badly while Ofer served as its CEO.

The press release makes similar claims about former Stratasys CEOs David Reis and Adina Shorr, as well as current CEO (though not a board member) Yoav Zeif. It further argues that Board members have enriched themselves in the process, stating, “A few days after reporting $1.37 billion loss in 2015, it was discovered that the company paid $1.44 million to the present director Mr. Scott Crump, founder of Stratasys, and to three other executives an additional $5.4 million in compensation.”

It is the more egregious claims that might trouble some investors, however. Specifically, Nano Dimension highlights Ziva Patir, former CEO of the Standards Institution of Israel, who reportedly received “tens of thousands of shekels” “in an improper manner from the Institute.” It’s difficult to verify such claims, but there was indeed a controversy in Israel over possible financial impropriety at the institute, with Patir providing her own commentary on the situation.

Worse still are the accusations against Yair Seroussi, the former chairman of one of the largest banks in Israel, Bank Hapoalim. Seroussi resigned from the bank when he reportedly failed to inform its Board and the Bank of Israel about a sexual assault allegation made against the bank’s CEO. He was also associated with a scheme in which the bank aided in U.S. customers avoiding taxes, for which Seroussi and five others, including the aforementioned CEO, were made to repay NIS 2.25 million (USD $0.63 million) in a settlement with U.S. authorities.

Nano Dimension’s Board

Some of the allegations are quite serious, while others seem more or less standard operating procedure in the world of business. However, it is worth noting that, in some cases, similar accusations could be made against Nano’s own Board. As we’ve noted in previous coverage, CEO and Chairman Yoav Stern was accused of extortion while serving as CEO at a defense company called Magal Security Systems. He was additionally faulted for possible nepotism in relation to his acquisition of Deep Cube.

Another Board member and Nano’s Chief Product Officer and Head of Mergers and Acquisitions, Hanan Gino, was the CEO of Israeli-American cyber security company Verint Systems from 2013 to 2016, whose technology was used by repressive regimes the world over for authoritarian practices, according to a report by Haaretz. Among them was the possible use of the technology to track members of the LGBTQ community in Azerbaijan and Indonesia; spy on legislators, journalists, and businesspeople in Peru; and surveil dissidents in Colombia. Emails between Gino and the CEO of Italian cyber company Hacking Team can be found on Wikileaks, demonstrating a working relationship between Verint and a firm whose products were used by Mexican drug cartels.

One can turn to Stratasys’s own published press releases for commentary on the financial performance of Nano Dimension and its legal battles with its activist investors. However, both companies have so far failed to highlight a link between Nano’s President Zivi Nedivi and Stratasys’s Chairman Dov Ofer, who worked together at Lumenis, the company that Nano management accused Ofer of poorly managing.

Attacking Stratasys on the Stock Market

A day after publishing this press release, Nano Dimension increased its offer to Stratasys shareholders at large from $24 to $25 per share, while also extending the deadline to accept the partial tender offer to July 31. Perhaps more importantly, the company wrote, “If NANO’s Tender Offer does Not Close – NANO Intends to Review its Investment in Stratasys, Including Possible Sale of All its 14.1% Holdings in Stratasys in the Open market.”

In other words, if the company is unable to achieve the requirements established by its tender offer, it may sell all of its Stratasys stock. This, in turn, could cause the stock price to drop significantly, making the company worth much less than 3D Systems has offered. By pursuing this strategy, Nano Dimension is gaining much more leverage in its negotiations. Despite the fact that analysts like Lake Street Capital’s Troy Jensen have argued in favor of a merger with 3D Systems over the alternatives, Nano is attempting to force its way back into the conversations.

Perhaps the strategy at this point is less about ensuring its own total control over Stratasys and more about ensuring that 3D Systems makes room for a three-way merger. As some of the accusations leveled against Stratasys Board members are more serious than others, this may also drive Board changes after a merger with 3D Systems, who may not want to hang onto members that have been involved in more serious controversies. As a result, those members may be dropped and, if a three-way merger is executed, some of Nano’s may be installed in their places.

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