Were the many financing rounds conducted for printers manufacturer Object Geometries over the past decade, before the company was merged with US company Stratasys Inc. (Nasdaq: SSYS), its competitor, performed in good faith and in compliance with the rules of proper administration? Or was fraud used to illegally dilute the shares of the company's founders and initial investors: Rami and Chana Bonen, Ilan Oppenheimer, Hanan Gotaiit, and Gur Shomron?
This question is about to be heard in the Central District Court, after Judge Yehezkel Kienar denied the defendants' petition for dismissal of the claim because of the statute of limitations and delay, and scheduled a pre-trial hearing for July 12. If the claimants' plea is accepted, these founders and investors are likely to obtain company shares worth tens of millions of dollars.
The statement of claim was filed only two years ago, but the affair began at the start of the preceding decade. In 1988, claimants Bonen and Gotaiit, together with Gershon Miller, founded a startup named Objet for developing 3D printers. As soon as the company was founded, the three men began recruiting additional investors, including claimants Oppenheimer and Shomron, as well as Moshe Sharon.
Months later, another investor, Allen (Elchanan) Jaglom, was recruited, and later became the company's main investor and controlling shareholder as a result of the ensuing financing rounds. By the time of the merger with Stratasys, Jaglom already held 27% of Objet, and received shares worth hundreds of millions of dollars immediately after the merger. Today, after a series of sales of shares, his holding in Stratasys shares is still worth $100 million, and he is the chairman of that company.
Defendants: It was public knowledge
Through Advocates Boaz Ben Zur and Tomer Shikarchy (Bonen and Oppenheimer) and Amir Ivtsan and Chagay Netzer (Gotaiit and Shomron), the claimants allege that the series of investment rounds during the preceding decade in which money was raised for the company through convertible loans caused the illegal dilution of their holdings, and constituted shareholder discrimination. They assert that the issuing of shares in the various investment rounds was at a lower price than their real value, while the conversion price in the first round was also retroactively lowered to make it correspond to the conversion price in the second round.
The lawyers representing Stratasys, Jaglom,Stratasys CEO David Reis and 14 other defendants petitioned for dismissal of the lawsuit, alleging that some of the financing rounds had taken place seven years or more before the date on which it was filed, and that the information had been available to the claimants in the past, and they were aware of it. The judge did not accept their plea, and ruled that the allegations would be heard
The Stratasys share is currently traded at $35, reflecting a $1.8 billion market cap, after plummeting from a peak of $136 in December 2013. The company lost $119 million on $750 million in revenue in 2014.
Published by Globes [online], Israel business news - www.globes-online.com - on June 16, 2015
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