The Battle Over 3D Printing’s Most Valuable Company

The 3D printing industry is in the midst of its biggest shakeup yet in the form of a battle over the sector’s most valuable company. After 3D printer manufacturer Stratasys
SSYS
announced its intent to merge with a smaller maker of metal 3D printers, Desktop Metal, it seemed that all hell broke loose, as multiple suitors vied to acquire Stratasys.

Stratasys is one of the two publicly traded 3D printing stalwarts—the other of which is 3D Systems. It also generates the most revenue of any pure play 3D printing company, having made $651.5 million in 2022, and has the largest market share of any business in the industry. With all of this in mind, it’s no surprise that not only is Desktop Metal interested in merging with Stratasys, but so are 3D Systems and Nano Dimension, an Israeli manufacturer of electronics 3D printers.

As straightforward as the value of the company may be, everything else about the drama has been anything but. Whatever happens with Stratasys has already proven to be important enough to 3D printing and the manufacturing industry beyond that the cast of players involved have been bogged down by lawsuits, activist investors, and other obstacles that are slowing down any potential merger from taking place.

Nano Dimension: The Small Fry With The Big Wallet

What seems to have triggered the battle over Stratasys can actually be traced back to Nano Dimension. Tiny in name and stature, this Israeli firm piled up over $1 billion in cash after eight public offerings of common stock—a significant war chest for a business with just $70 million in annual revenues. However, as its largest institutional investor, Cathie Wood’s ARK Investment Management, pulled out, a relatively unknown Canadian investor, Murchinson Ltd., dove in, acquiring some four percent of Nano Dimension, and immediately began making trouble.

After Nano’s Board of Directors rejected a buyout offer from Murchinson, the activist investor sought to oust management through shareholder actions, which have since led to legal battles in court. This move by Murchinson to takeover Nano Dimension led to Nano’s own attempts at a hostile takeover of Stratasys, as a means of delivering on promises to its shareholders.

With its mass of cash, Nano Dimension bought over 14 percent of Stratasys stock causing the latter company to enact a protective measure, called a “poison pill,” to prevent more shares from being purchased. Since then, Stratasys has rejected multiple offers from Nano for an all-cash acquisition of over $1 billion. This didn’t stop the smaller business from going directly to Stratasys shareholders at large, offering to buy out their stock in an attempt to attain majority control of the 3D printing stalwart.

Desktop Metal: The Debutante

Though Stratasys had apparently been in talks to merge with startup Desktop Metal for two years, the aggressive tactics from Nano seemed to have triggered the two firms to announce their intentions publicly, as a combined unit would dilute Nano’s overall ownership. Though Desktop Metal developed some innovative metal 3D printing techniques after being backed by the likes of Google
GOOG
, BMW, and Stratasys itself, Desktop seemed to become somewhat of a roll-up vehicle after it went public in December 2020. With its IPO cash, it first purchased a plastic 3D printing pioneer before buying a firm that developed a competing metal printing technology.

By combining with Desktop Metal, Stratasys would finally be able to add metals to its portfolio. In many ways, the duo would be a power couple in the industry and, therefore, a greater threat to the other pure-play 3D printing stalwart, 3D Systems.

3D Systems: The Old-Timer

3D Systems, credited with patenting the very first 3D printing technique in 1986, has had a broad technology and material portfolio, including different types of plastic and metal printing systems. Over the past several years, it has witnessed Stratasys add products to its range that directly compete in all ways that don’t include metals. The proposed merger with Desktop would seem to have been the last straw, as, just days after the deal was announced, 3D Systems made public its own bid to buy Stratasys for stock, cash and 40 percent ownership of the resulting entity.

The Bit Players

Within the drama are a number of other characters with complex backstories. Led by the son of a New York real estate billionaire, Murchinson has been fined $8.15 million by the U.S. Securities and Exchange Commission related to a case in which suspicions of problematic short selling were raised. Another activist investor taking on Nano Dimension has been suspected of similar behavior.

Meanwhile, Goldman Sachs is advising 3D Systems in its proposals to Stratasys and, according to one report, has held a meeting with a firm that is attempting to thwart the Desktop merger. That party is the Donerail Group, a very new finance management company whose only real public activity has been the activist takeover of a well-known gaming peripheral company, Turtle Beach
HEAR
Corporation. Donerail is headed by Chief Investment Officer William Wyatt, who actually began his career at Goldman a decade back, and his business’s involvement in this case hints at the possibility of aggressive action toward the Stratasys board.

At the same time, Desktop Metal strengthened itself in the merger deal by taking on a sympathetic investor, Iranian-American tech billionaire Faharid “Fred” Ebrahimi. Additionally, to protect itself against a hostile takeover while it attempts to merge with Stratasys, Desktop Metal adopted its own poison pill measure, which resulted in a lawsuit by one of its institutional investors, the Building Trades Pension Fund of Western Pennsylvania.

Stratasys, too, is facing a lawsuit from the former shareholders of a startup it purchased, who claim the company didn’t fulfill the terms of their acquisition agreement. The suit is meant to ensure that, regardless of how the merger proceeds and with whom, the former shareholders have a chance to get their full buyout proceeds in court.

Most recently, Stratasys has allowed for a vote to take place at a meeting in August which will allow shareholders to vote to potentially replace its entire Board of Directors with the management team from Nano Dimension.

We still don’t know what will happen next. Stratasys and Desktop Metal are intent on joining forces, while 3D Systems and Nano Dimension seem dedicated to taking Stratasys for themselves.

Why Does It Matter?

It could be that all of these parties are simply vying for control of the comparatively small 3D printing market, estimated to be worth about $13.5 billion. For the stalwarts, that’s reason enough to duke it out, but the presence of outside players and larger manufacturing trends suggest that there’s more at stake.

At the moment, nations and corporations globally are rolling out advanced manufacturing initiatives in a dual-pronged effort toward supply chain resilience and decarbonization. Alongside robotics and artificial intelligence, 3D printing is at the heart of this strategy as it can be used to locally produce critical items that improve energy efficiency and, therefore, reduce the carbon footprints of any number of human activities, from flying planes to building cars.

These projects are only just beginning but can be found throughout the initiatives funded by the Bipartisan Infrastructure Law, CHIPS and Science Act, and Inflation Reduction Act in the U.S., with similar programs pursued in Canada, Australia, the U.K., E.U., and China. They are being supported by some of the world’s biggest corporations, such as Lockheed Martin
LMT
and Siemens, with the specific goal of integrating 3D printing into their production via small suppliers like the companies mentioned in this article. If the manufacturing industry at large has an estimated value of $13 trillion, decarbonization and supply chain resilience are 3D printing’s gateway to subsuming that industry and what becomes of Stratasys may be the first bullet fired in the larger fight to come.