Desktop Metal sues Nano Dimension – what is it about, and what are the further implications?
The Atomic Layers: S5E21 (00137)
Atomic Layer of the Day:
Phew, what a day... First, Nexa3D announced a “scale back,” and shortly afterward, Desktop Metal filed a lawsuit against Nano Dimension for “Breach of Merger Agreement.” The last time we experienced such dramatic events was on July 3rd, when, in rapid succession: Shapeways announced bankruptcy, BASF revealed it was spinning off Forward AM and effectively exiting the 3D printing industry, and… Nano Dimension declared it was acquiring Desktop Metal.
That was exactly 170 days ago.
Since then:
Shapeways thankfully revived under its old management in the Netherlands and even recently acquired Thangs, which could help it regain its former glory.
BASF and Forward AM... well, that’s a complex story. Forward AM declared insolvency a month ago, but that’s just one piece of a larger narrative.
As for the merger between Desktop Metal and Nano Dimension, it had long seemed like a “done deal.” Given the financial situations of both companies, it was an incredibly risky and bold move but, for Desktop Metal, the only viable option. As has been repeatedly shown through actual figures, without the protection of a wealthy partner, Desktop Metal has no chance of surviving independently.
Of course, along the way, there was also Nano Dimension’s announcement of its acquisition of Markforged, but that’s temporarily unrelated to this matter, so let’s set it aside.
The issue here is that the formal merger of the two companies seemed oddly delayed. On October 3rd, the shareholders of both firms officially approved the deal. The companies were supposed to unite in Q4 2024.
October passed. November passed. And still, nothing.
Nano Dimension was present at Formnext, but it was notably reserved in showcasing Desktop Metal’s solutions at its booth (apparently, something was shown, but I couldn’t spot it).
Unexpectedly, December brought a whirlwind of developments, but mostly within Nano Dimension itself. One of the company's shareholders, Murchinson, orchestrated a sort of coup, first introducing four of its directors to the board and removing CEO Yoav Stern. Shortly afterward, the remaining six directors collectively resigned. Since then, “Murchinson has been running the show” at Nano Dimension.
Yesterday, Desktop Metal made its move – filing a lawsuit against Nano Dimension. Before diving into the analysis of this event, let me state what we all intuitively suspect: if not for the leadership change at Nano Dimension, this lawsuit likely wouldn’t exist. This action is clearly a reaction.
What is the Lawsuit about?
Desktop Metal is accusing the company of breaching the merger agreement. Desktop Metal claims that Nano Dimension failed to make the necessary efforts to obtain required regulatory approvals, which is delaying the merger's completion.
In the lawsuit, Desktop Metal is asking the court for the following:
a declaration that Nano Dimension has failed to fulfill its obligation to take all necessary actions to finalize the merger as quickly as possible
an injunction preventing Nano Dimension from terminating the merger agreement or taking actions that violate its terms.
If the court agrees with Desktop Metal’s requests, Nano Dimension could be forced to expedite actions to complete the merger. Otherwise, the merger process may face further delays or be entirely halted.
In essence, Desktop Metal has made a rather desperate move to ensure that the Delaware Court of Chancery provides a legal guarantee that the new board (and who knows? maybe a new CEO?) cannot back out of the deal. Even if the merger cannot proceed as planned.
Why might the merger cannot proceed?
Here, the situation becomes complex. The key to understanding it lies in the mention of an American regulatory body in the lawsuit: the Committee on Foreign Investment in the United States (CFIUS).
The Formnext Rumor
At Formnext, by a complete chance, I had a conversation with "someone familiar with the situation." I learned that the U.S. government opposes the Desktop Metal-Nano Dimension merger. (Not the "entire government," of course, but specific regulatory agencies, such as CFIUS.)
In short, someone "up there" raised a question: Is it wise to sell “strategic AM technology” abroad?
And this wasn’t about Israel specifically, but about the general principle.
As this information came from a single source who didn’t seem particularly supportive of Desktop Metal, I filed it away in the drawer under "Let’s wait and see..."
Well, now I can pull it out of that drawer and show you. Since the lawsuit mentions CFIUS in the context of the entity that is the last bastion stopping the merger, I guess now we know why it hasn't happened yet.
So is the U.S. government to blame?
Not entirely. Here’s another key phrase from the lawsuit:
Desktop Metal seeks specific performance (…) to cooperate in seeking approval by the (…) “CFIUS,” including finalizing negotiations and executing the mitigation agreement proposed by CFIUS (as required by the Merger Agreement), and to close the merger within five business days of receiving CFIUS’ approval.
I interpret this as CFIUS having proposed a solution that Nano Dimension is unwilling to accept. It’s likely that this proposal heavily favors the U.S. and is less favorable to Israel (strictly in the context of technology).
Getting to the point
As we have already learned, Murchinson is not in favor of acquiring Desktop Metal and Markforged. Could it be that the primary motivation behind taking control of the board was precisely to sabotage the entire operation?
For Desktop Metal, the failure of the merger means death. As the Great Gennady Shafir wrote today:
According to my estimates, Desktop Metal has only $15–20 million in cash left in its accounts. With a cash burn rate that could exhaust these reserves through Q1 2025, the company may face the risk of bankruptcy as early as next spring if it fails to secure additional funding.
Knowing this, we see the full scale of Desktop Metal's desperation as it fights for its life:
Desktop Metal also seeks a declaration of the Court that, (…) Nano Dimension (…) remains obligated to use its reasonable best efforts to take all actions necessary to consummate the merger as soon as reasonably possible, and injunctive relief enjoining Nano Dimension from terminating the Merger Agreement or taking any action inconsistent with its obligations under the Merger Agreement.
What’s next?
From both a human and business perspective, the situation looks very bad.
First, this is happening right before the Christmas holidays, which, symbolically, feels wrong. I understand it wasn’t planned this way—it just happened—but still...
Second, assuming the court sides with Desktop Metal and forces Nano Dimension to proceed with the merger, the future collaboration between the two organizations after something like this will hardly be rosy. Especially considering that, even from a financial perspective, their cooperation will be challenging and highly risky.
Third, perhaps the worst off in this mess is Markforged, which, while facing its own problems, isn’t in as dire straits as Desktop Metal. Yet it’s being unwillingly dragged into this drama and soap opera.
Final thoughts
Despite the opinions of some third-rate “serial disruptors” born and escaped from Poland, I don’t feed off bad news or build my career on negativity. I have nothing personal against Desktop Metal or Nano Dimension. I don’t know these people (nor do I feel the need to meet them). What I critique are their actions, which are bad—bad for the industry, bad for the people in it, and just bad overall.
C’mon—criticizing people who burned through billions of dollars due to poor management, burying several solid companies they acquired along the way, isn’t “hating.” It’s a call to change behavior and act with common sense!
And who are you to lecture anyone, huh?
I’m the one who hasn’t wasted billions of dollars on failed business ventures—twice.
Atomic Layer from the Past:
12-21-2016: Farsoon Technologies announced its official entry into the U.S. market and the establishment of Farsoon Americas.
News & Gossip:
We are still waiting for Nano Dimension's response. I wonder who exactly will respond? And I’m courious how Yoav Stern feels about this? Was the lawsuit filed against him, or maybe with his behind-the-scenes consent, to push things forward against the will of the new board?
The latest version of the 3D printing slicer PrusaSlicer, 2.9.0, offers numerous new features and improvements, like the ability to manage multiple print beds in one project, improved stitching options and new surface editing tools.
And that, my friends, is how our industry awards ceremony for 2015 looked like. The title of the best new 3D printer of the year was won by Sinterit. But the next places were also interesting. Just like in the category of the best new company of the year, where Spectrum Filaments triumphed, followed by two other noble companies.