As we reported earlier this week, there was a coup of sorts at Nano Dimension. What’s next for the company?
What happened? Let’s back up a bit.
Nano Dimension found itself with a rather large cash reserve, approximately US$1B. The management of the company decided this was best spent by acquiring other companies to grow the operation. Nano Dimension spent most of the past two years acquiring a variety of companies, such as Admatec. They also struck deals to acquire Markforged and Desktop Metal, both of which have yet to close.
Meanwhile, many Nano Dimension shareholders were distressed with this strategy, feeling it was unwise considering the current investment climate. Over the past couple of years, most of the 3D print companies have dramatically lost value, effectively erasing major investments. The investors wanted to avoid that scenario with Nano Dimension.
However, the board of Nano Dimension was strongly supportive of company management. This was unsurprising, as the board actually included some of the management itself, including the CEO.
The investors took the matter to court, which decided to allow a special general meeting in which four new independent investors were elected as board members. In a shocking twist, the other board members abruptly resigned this week, leaving the company’s board entirely controlled by the upstart investors. Investors that were not happy with Nano Dimension management.
With a completely new set of board members, the company will almost certainly change in significant ways. What might we expect to happen?
It’s very possible that the new board may choose to replace the management of Nano Dimension. They were unhappy with the strategy undertaken by the current management, and the role of a board of directors is to hire a CEO that carries out their strategy. If current management doesn’t follow their directions, there could be changes.
With management change, there will be strategy change. Nano Dimension’s strategy has been one of acquisition. The theory from the CEO has been to consolidate the industry, which would reduce some costs: if five companies combine, then you don’t need five chief financial officers, for example.
However, the real problem in the industry is that the products aren’t selling as much as was promised to big investors. The solution, in my opinion, is to adapt or change products to meet the larger market’s needs. That means equipment designed for the enormous manufacturing market, not machines designed for individual use. It may be that the new board pushes the company to that type of strategy, quite different from acquisitions.
But hold on, Nano Dimension has two outstanding acquisitions in play: Markforged and Desktop Metal. These deals have not yet closed, as they take months to obtain permission from company shareholders.
It may be that the new strategy of Nano Dimension might not want to proceed with these acquisitions. While a deal has been signed between the companies, there will almost certainly be a “break-up fee” written into the contracts. Nano Dimension could, if the break-up fee is not too significant, simply stop the deal from happening.
I believe some investors in Markforged have considered this risk and have adjusted their valuation of the company. As I wrote the other day, Markforged’s valuation at the time was in the US$80M range, while Nano Dimension was to pay US$123M for the company. That doesn’t make sense unless there is a risk the deal may not happen.
Well, that risk just got a lot higher with the board changes.
This week, Nano Dimension’s valuation has risen, likely due to the board changes, while Markforged’s valuation fell by around 20% as of this writing. It seems investors have recognized the added risk. Desktop Metal experienced a similar drop in value, and the week isn’t even over yet. There may be further drops as the market absorbs this news and subsequent events.
I would not be surprised if these deals were cancelled by Nano Dimension, and that would leave those companies on their own. Both have sought acquisition partners, especially Desktop Metal, so we may see them attempt to connect with another party.
Times are changing at Nano Dimension.
Via Nano Dimension
