CEO fails to takeover Nano Dimension and its $1.2 billion in cash
CEO fails to takeover Nano Dimension and its $1.2 billion in cash
The shareholders of the industrial 3D printing company did not approve the repricing of Yoav Stern's options, which would have put them in the money and allowed him to become the largest shareholder in the company
Yoav Stern has failed in his attempt to seize control of Nano Dimension and its $1.2 billion of cash. In a laconic report to the U.S. Securities and Exchange Commission (SEC), Nano Dimension, which is traded on the Nasdaq, reported that its shareholders did not approve three issues on its agenda. The most significant issue was that of the shareholders of Nano Dimension, which is trading without a controlling interest, rejecting the repricing of the options belonging to CEO and Chairman Yoav Stern.
Nano Dimension, which is trading at a market valuation of $600 million, but holds $1.2 billion in its account after raising $1.5 billion, asked to reduce the exercise price of the options given to the CEO $6.16 dollars per share to $2.46 dollars per share. When this request first arose, the reduced exercise price was the same as the share price, which would have allowed Stern to become the largest shareholder in the company with a 10% stake almost for free. This would have also made him the actual controlling owner, since other shareholders hold smaller stakes, with no other shareholder owning more than 5%. Today, the stock price of Nano Dimension is only slightly lower and stands at $2.36.
In addition, the company requested to increase the number of shares from 500 million to 800 million - an unusual number for a company the size of Nano Dimension. Apparently, a larger number of shares could have served the company's acquisition strategy, but at the same time, a larger number of shares would have made it more difficult for parties outside the company to take control of it, which could have been convenient for Stern if the change in his options had been approved. The capital increase was also rejected by the shareholders, similar to the third issue - increasing the indemnity ceiling for the company's directors.
To a large extent, it can be said that this is a victory for the Murchinson hedge fund, which is currently the largest shareholder in Nano Dimension (4%). At the beginning of the month, the fund submitted a request for an injunction to hold up the meeting. In the application, submitted by the Israeli law firm Goldfarb Seligman to the District Court in Lod, it was stated that Nano Dimension refused Murchinson's requests to allow it to review the documents and financial opinions that were the basis of the various proposals. Last September, Murchinson submitted a non-binding offer to purchase Nano Dimension for $995 million, but was rejected by the board of directors. The offer reflected a 52% premium on the company's value at the time.
For Murchison, the proposals were seen as an attempt to block their attempts at acquiring control of the company, both by making Stern the actual controlling owner of Nano Dimension, and by increasing the share capital, which may later be used against a takeover attempt. As mentioned, the meeting took place, but the shareholders did not approve the requests. The shareholders' vote was in-line with the recommendation of the American institutional consulting firm ISS which called on the shareholders not to approve the requests approved by the Nano Dimension board of directors.
Around the same time as the publication of Nano Dimension's financial reports at the beginning of the month, Yaron Eitan, who served as chairman of the compensation committee, left the board of directors. Eitan is considered close to Stern, who managed the DVTEL company he founded. It was estimated that the reports about Stern's attempted takeover of Nano Dimension contributed to Eitan's decision to leave.
Nano Dimension's revenues in the third quarter amounted to $10 million, less than in the previous quarter, when revenues stood at $11.1 million. The operating loss jumped to $33.8 million from $23.1 million in the previous quarter and $24.5 million in the corresponding quarter. Bottom line, Nano Dimension recorded an unusual loss of $67 million - more than 3X compared to its third quarter loss in 2021.
In a press release published by Nano Dimension on Wednesday the company claimed that "a shocking smear campaign was launched" against it and which it believes "was designed to harm the Company and its managers."
"We believe that this was as a pre-emptive tactic to justify the sought takeover of Nano Dimension's assets by a small entity, which itself has a history of trouble with regulators and authorities in the USA. As a next step in the entity’s campaign, they filed for an injunction to hold up the Meeting; thus, holding up efforts for all shareholders to rightly express their own views in a proper governance forum. The Israeli district court, where this injunction effort was launched, quickly dismissed the motion.
"Naturally, as a shareholder minded company, the results of the vote will be respected. Furthermore, Nano Dimension will continue to execute on its vision through its M&A initiatives, R&D programs, and business development plans. These efforts have already yielded results, and we expect this to be more of the case in 2023 as we foresee notable opportunities in the industry that will enhance and expand Nano Dimension business - with strong and robust capital and other assets – and therefore benefit its shareholders."
