Long-serving CEO of Israeli-U.S. 3D Printer Maker Steps Down After Rough Ride

Omri Zerachovitz
Omri Zerachovitz
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Omri Zerachovitz
Omri Zerachovitz

Investors in Stratasys, the Israeli-U.S. maker of 3D printing technology, have had a rough ride over the last several years. Sales and its share prices have both plunged amid a $1.4 billion loss last year. The company’s acquisition of desktop printer manufacturer MakerBot in 2013 left a trail of massive write-downs

Last week its long-serving CEO, David Reiss, announced he was retiring at the end of June and will be replaced by Ilan Levin, who has served as a director since the Israeli company Objet merged with the U.S. company Stratasys in 2012.

But one problem facing Stratasys that hasn’t garnered much attention is a U.S. Securities and Exchange Commission investigation. The SEC’s enforcement decision approached the company at the start of March on the matter, which was briefly mentioned in Stratasys’ latest 20-F filing with the agency.

“The SEC enforcement division issued a subpoena to us requesting a number of documents in connection with an investigation relating to the valuations and other calculations used by us to assess the impairment of goodwill and/or intangible assets included in the balance sheet contained in our filings with the SEC,” Stratasys wrote.

“This matter is at a very preliminary stage, and we intend to cooperate fully with the SEC,” it added without providing any further information.

On Friday, Stratasys’ New York-traded shares fell 1% to $23.05. Two years ago, they were trading at $91.75.

The write-downs on goodwill relate to the merger with Objet and the acquisition of Makerbot and attracted the attention of investors last year, if for no other reason than that they amounted to $942 million and accounted for much of the company’s 2015 loss.

Objet was bought at a $630 million valuation and Makerbot at a $400 million one, but in practice they were higher because the transactions were both done in shares rather than cash.

Makerbot proved to be a real headache for Stratasys, which quickly discovered serious problems in the reliability of the company’s production process.

Stratasys is being sued in the United States by investors who say management knew about Makerbot’s problems and concealed them from investors. Their suit includes testimony from a Stratasys employee and copies of meeting minutes. Stratasys says the lawsuit is baseless.

In the meantime, Startasys has reorganized Makerbot to make its manufacturing and other operations more efficient and has replaced the unit’s CEO, who was leading the company when the problems were first uncovered. Among other things, Makerbot is shutting its Brooklyn manufacturing operation less than a year after starting it and will transfer it to a outsider contractor.

Apart from the tactical errors, Stratasys has been contending with a market that has failed to meet its high expectations. Like other 3D-printing technology companies, it misjudged how quickly manufacturers would adopt 3D printing in their manufacturing.

Nevertheless, Fortune magazine reports companies like HP and Toshiba are developing their own 3D printers, which could give the technology more mainstream appeal. The market for 3D printers and related software could reach $20 billion by 2020, according to consulting firm Wohlers Associates.

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