I’ve been investing since I was about 15 years old. One of the first lessons any investor will learn is that they must do their own due diligence, and to never rely on another person’s ‘hot tip.’ Additionally, a company’s guidance is just that, ‘guidance.’ When I make the right call and get in on a stock prior to it taking off I credit only one person for that success, myself! At the same time, when I make a lousy pick, lose a bunch of money, and feel like crap, I don’t blame the company and I don’t blame analysts, I blame myself, and look at it as an expensive learning experience.
Recently we’ve seen several 3D printing stocks drop swiftly in price. This was led by Stratasys (NASDAQ:SSYS), earlier this week when they warned that their Q4 guidance for 2014 would likely miss the mark, and presented 2015 guidance which didn’t exactly go as expected either. This caused the stock to drop over 30% within minutes of the market opening on Tuesday morning. Yes, lots of people lost money on paper and, if they sold, may have lost actual money as well. There were a lot of pissed off investors, many who seem to now be blaming the company.
Because of this drop in share price, Robbins Geller Rudman & Dowd LLP has just filed a class action suit against Stratasys Ltd. in the US District Court for the District of Minnesota alleging that the company and certain of its officers violated the Securities Exchange Act of 1934. For those who are unaware, the Securities Exchange Act of 1934 is a law which governs the secondary trading of stocks, bonds, and debentures. It pretty much outlines how publicly traded companies and their officers are expected to act, and sets forth rules and guidelines to make the marketplace fair to all.
The suit has been filed on behalf of any shareholders who purchased common stock during the ‘class period’ between May 9, 2014 and February 2, 2015. Robbins Geller Rudman & Dowd LLP claims that during this time frame the company misled investors by issuing positive statements regarding their acquisition of MakerBot, which also led to the company putting forth higher than expected guidance for 2014. During this time frame the stock traded at all-time highs, reaching a price of $129.28 per share. The suit alleges that ‘false and misleading statements and omissions’ led to these ‘artificially inflated prices.’
What the legal firm fails to point out is that during this time frame numerous 3D printing stocks were also trading much higher than they are today. 3D Systems, for instance, was trading at around $53 per share as opposed to today’s price of around $30 per share, voxeljet was trading at just under twice its current share price, and The ExOne Company also was trading at prices well north of today’s share price. The 3D printing market in general was in the midst of a deflating bubble.
Yes, perhaps Stratasys was at an all-time high during this class period, while other stocks had already started their descent from the top, but to claim that the company issued false and misleading statements by simply providing figures on MakerBot’s tremendous growth is a bit of a stretch. To be fair, the company is likely barely to have missed their initial 2014 full-year guidance figures. Initially they had expected to realize revenue of $750-$770 million. On Monday Stratasys revised these numbers to $748-$750 million. Yes, they could actually still meet both estimates ($750 million is in both ranges)!
Perhaps this country is a bit too sue-happy, not willing to man-up and take responsibilities for their own poor decisions. What happened here was a bubble burst. The stock has since bounced back, and more than likely, over the next 3-4 years, shares will once again be trading at new all-time highs. I just wonder if the same people suing the company today will be throwing money back at them when shares are back on an upswing. My guess is NO.
Are you an investor in Stratasys stock? Did you purchase shares within the time frame of the suit? Will you be taking part in the class action? Let’s hear your thoughts in the Stratasys Class Action forum thread on 3DPB.com. For those interested in joining the suit, you will have 59 days left (April 6) to seek lead plaintiff status.
(Disclosure: Yes I do own shares in Stratasys, I bought more on the dip at $52.44 on Tuesday, and I am not partaking in this suit. )