With more than $1 billion dollars in cash, 3D-printing technology company Nano Dimension (Nasdaq: NNDM) has been the focus of a control battle in the past two months. From the company’s point of view, it looks like a hostile takeover attempt with the aim of laying hands on its cash, while the "predator", Canadian investment firm Murchinson, presents it as a bid to unlock value.
The share price of Nano Dimension, a loss-making company with unspectacular sales, became a stock market sensation. Between early 2020 and early 2021, it soared by some 2,500%, powered by a favorable sentiment towards technology companies, by developments presented by the company itself, and, perhaps mostly, by small investors following recommendations on the Robinhood app and after the recommendation by Ark Invest founder and CEO Cathie Wood, then at the height of her reputation.
Nano Dimension, run by Yoav Stern (who serves as both CEO and chairperson), took advantage of the surge in the company’s share price to raise a total of about $1.5 billion in a number of offerings, with the aim of acquiring other companies in the field and accelerating its growth.
The company did manage to make a few small acquisitions, but in the meantime the market changed significantly. The technology stock bubble burst, with investors now preferring profitable, well-established companies. As a result, Nano Dimension’s share price fell 82% from the peak it reached n 2021, and the company’s current market cap is $760 million, which is less than its cash.
Five months ago, Murchinson, which is headed by Marc Bistricer, made a $995 million takeover bid for Nano Dimension, but it was rejected by the board of directors. Last December, Murchinson filed an urgent petition for a court injunction preventing Nano Dimension from convening a shareholders meeting. The company had sought such a meeting to approve repricing of share warrants held by Stern, and to update the indemnity for directors.
Stern, a former Israel Air Force pilot, was appointed CEO in January 2020. Before that, he managed and invested in various technology companies, mainly in the US. He came to Nano Dimension when shareholders in the company approached him to invest in it, at a time when its financial position was precarious. He later led the series of offerings by the company. Repricing of his warrants at the shareholders’ meeting was intended to give Stern a benefit of tens of millions of dollars, according to Murchinson.
In the end, the petition was not granted, and the shareholders’ meeting took place as planned, but the shareholders rejected the company’s proposals. At the time, Nano Dimension accused Murchinson of conducting a smear campaign, and said that "Nano Dimension’s capital has become a target and temptation for entities with an interest in taking over the Company for their business or personal needs. Their actions suggest they have the intention of dismantling the Company."
The next chapter in the story came three weeks ago. Murchinson announced that together with two associated entities it held 8% of the shares in Nano Dimension, and that, in accordance with the Companies Law, it was calling on the company to convene a special shareholders meeting at which its proposals would be raised, namely to dismiss four directors, Stern among them, and to appoint two candidates in their place, Ken Traub and Dr. Joshua Rosensweig.
Last week, Murchinson issued a notice of a shareholders meeting itself. It said that the Nano Dimension board had not convened a meeting within the time allotted, and that it was therefore convening a meeting on March 20 at the offices of its legal counsel, Goldfarb Seligman.
In its notice of the meeting, Murchinson claims among other things that Nano Dimension is characterized by "terrible corporate governance". It says that the board of directors is too big, that 55% of its members were not elected by the shareholders but were co-opted, and that the company manipulates the staggered structure of elections to the board and changes the dates for electing directors. Besides Stern, Murchinson seeks to remove from the board Oded Gera, Igal Rotem, and Dr. Yoav Nissan-Cohen, and, as mentioned, to replace them with Traub and Rosensweig.
For its part, Nano Dimension has warned shareholders that the notice of the meeting is illegal and should be ignored. "Only The Company will inform its shareholders if and when a valid meeting will be held," its announcement says.
Israel’s Companies Law states that the board of directors of a company will convene a special shareholders at its discretion, or at the demand of "two directors or one-quarter of the directors in office" or of "one or more shareholders with at least five percent of the issued share capital and at least one percent of the voting rights in the company."
The law states that if the board of directors does not summon a meting, then under certain conditions a shareholder can do so himself. Murchinson and Nano Dimension are in dispute over whether the conditions have been met or not.
Nano Dimension has asked Murchinson to present confirmation of full ownership of the shares, and to present similar confirmation at the time of the meeting, in order to ensure that a shareholder with near zero holding will not affect the composition of the board. In addition, since what is traded on Nasdaq are American Depository Shares, while Nano Dimension’s shares are deposited at a US bank, then, according to the company, convening a meeting such as Murchinson is trying to convene breaches the agreement with the bank, which will not recognize any vote at it.
Nano Dimension says that decisions by the meeting called by Murchinson will not bind it, meaning that it will ignore any vote to remove directors. Moreover, the company says that it is concerned at what it calls "a repetitive record of stock manipulations and violations of law" by Bistricer and Murchinson, and "legal proceedings with regulatory authorities." A proceeding versus the US Securities and Exchange Commission was settled by a fine without acknowledgement of responsibility, while a proceeding in Canada has not yet finished.
Murchinson, on the other hand, not only says that the meeting is legal, but claims that the Nano Dimension board acted unlawfully in failing to convene the meeting as required by the Companies Law. Incidentally, another matter that has fueled the dispute is the ostensibly technical one of registering employee options for trading, which could change the ownership structure. That too is before the court.
Poison pill
Now, the Nano Dimension board has adopted a "poison pill" strategy to ward off a hostile takeover. This involves giving anyone who owns one Nano Dimension ADS the right to purchase half an ADS at a price of just $0.01. This measure will be invoked if any entity amasses a stake of more than 10%, and it is valid for one year. Last summer, when Nano Dimension acquired12% of rival company Stratasys, (Nasdaq: SSYS), the latter adopted a similar mechanism, even though Nano Dimension claimed that it had no intention of taking it over.
Nano Dimension believes that Murchinson seeks to take it over, but the latter is apparently unfazed by the poison pill tactics, and, at the moment at least, its moves do not necessarily indicate a takeover bid (it could, for example, have demanded the dismissal of all the directors and the appointment of a similar number to replace them, or have bought more shares on the market).
Murchinson says that changing the board will enhance investor confidence and unlock value at the company. It apparently believes that other shareholders share its view, and that they will vote in favor of its proposals. That would appear to be corroborated by the shareholders’ opposition to the company’s proposals at the general meeting held in December.
So what’s the next stage? It seems that Nano Dimension will not seek to have the meeting called by Murchinson outlawed, but will not recognize the results of any vote at it, which will almost certainly lead to a court battle afterwards. It does not look as though the saga will end soon. Meanwhile, shareholders could benefit from upside in Nano Dimension stock. The share price has risen by 28% so far this year as the battle between the company and Murchinson heats up, with the expectation of measures that will unlock value.
Nano Dimension is represented by Adv. Noa Havdala and Adv. Amichay Tessler of Sullivan & Worcester Tel Aviv.
Published by Globes, Israel business news - en.globes.co.il - on February 19, 2023.
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