ISS Continues to Support Need for Board Change at Nano Dimension ? But Murchinson Does Not Believe Recommendation Goes Far Enough
Murchinson Ltd. (collectively with its affiliates and funds it advises and/or sub-advises, "Murchinson" or "we"), the largest shareholder with approximately 6.2% of the outstanding shares of Nano Dimension Ltd. (NASDAQ: NNDM) ("Nano Dimension," "Nano," or the "Company"), today commented on the recent report from Institutional Shareholder Services Inc. ("ISS") regarding Nano Dimension's upcoming Annual General Meeting of Shareholders (the "Annual Meeting"). The Annual Meeting is scheduled for September 7, 2023 (with a voting cut-off set for August 31, 2023 at 12:00pm ET).
In its report, ISS stated the following:1
- "...(T)he company has traded at a meaningful discount to its cash value per share and there are significant concerns regarding the governance structure and independence of the board. These factors indicate that some degree of change is necessary and that shareholders would benefit from enhanced board independence."
- "Though we supported the dissident at the March EGM and continue to believe that some degree of board change is needed, we are hesitant to support additional change prior to the resolution of the lawsuit..."2
- "In the event the dissident loses the lawsuit and shareholders vote in accordance with our recommendation at this meeting, the board would consist of seven incumbent directors. Given that the dissident has made a case for change, this would not be an ideal outcome..."
- "As such, enhanced board independence is a priority which seems best realized by the removal of Amit Dror, given his role as a co-founder and current executive of NNDM, and Igal Rotem, consistent with our recommendation at the March EGM."
In advance of the March EGM, ISS recommended for the removal of Chairman and CEO Yoav Stern and three other incumbent directors from the Nano Board of Directors (the "Board"), and the appointment of both Murchinson nominees. Shareholders overwhelmingly supported this outcome, with ~86% of votes cast at the meeting for Murchinson's proposals ? results the current Board continues to deny. In that report, ISS stated:
- "Stern is at the center of the underperformance and corporate governance concerns underpinning the dissident's compelling case for change," and regarding Yoav Stern's potential departure, "that risk is worth accepting due to the urgency of the situation and the possibility of more value destruction under his continued guidance."
In response to the ISS report, Murchinson stated:
"Although it is positive that ISS continues to recognize the need for Board change at Nano Dimension, we disagree on the right degree and pathway. The situation at Nano is urgent and requires certainty. While agreeing with many of the arguments we have made regarding Nano Dimension's sub-cash valuation by the market, uninspiring capital allocation and corporate governance failings, ISS is seemingly content to wait for the outcome of the Israeli litigation ? a risky proposition given the current Board's irresponsible past actions that could have resulted in disastrous acquisitions.
While we recognize that ISS believes Murchinson has not put forth the level of granularity it typically requires in a campaign that will result in an overhaul of the Board, the abuses of power here ? and related risks to shareholders ? are anything but typical. As we thought was made clear to ISS during our engagement, the severe lack of transparency from Nano and the baseless exclusion of some of our proposals has precluded us from going further in terms of discussing operational plans or the several highly qualified potential interim CEO candidates we have identified for Nano. Further, ISS essentially ignored that Nano's Board unlawfully excluded two of our submitted nominees possessing significant experience relevant to the 3D printing industry, and then criticized our slate for lacking this expertise. We believe this situation required ISS to adapt its policy to a company that mocks its investors and the true intent of ISS policy while clearly writing a whole new chapter on what failed corporate governance and disregard for Israeli corporate law looks like.
Alarmingly, we have received new information about the voting process for the Annual Meeting that sheds more light on the Board's willingness to entrench itself at all costs. We have been informed that Nano has sent outdated proxy materials to selected holders before the July 31st record date, intentionally delayed the mailing of the updated proxy materials, and intends to recognize votes from both outdated and updated proxy materials despite the inherent inconsistency between the two and the clear manipulation embedded in doing so.
All shareholders who support immediate, certain and meaningful change at Nano are encouraged to vote for all of Murchinson's proposals at the upcoming Annual Meeting."
Murchinson believes shareholders must think carefully about what their vote is endorsing at this election. Based on ISS's own words, a vote for the status quo is a vote approving of:
- The blatant and repeated disenfranchisement of shareholders ? ISS recognizes that, "There are also concerns with the company's response to the dissident's campaign, including the adoption of a poison pill, the pending lawsuit, and the refusal to include the nomination of two candidates proposed by the dissident on the ballot at this meeting." ISS further notes, "On balance, the company appears to have devoted most of its efforts to entrenching its board and thwarting the dissident, rather than providing shareholders with compelling reasons to support its arguments."
- A capital allocation track record that has failed to inspire confidence ? as ISS points out, "Perhaps most importantly, the company has been trading at a negative enterprise value since late 2021, indicating the market does not yet have faith in the company's ability to build meaningful value through M&A."
- Nano's no-show independent directors ? The fact that ISS is recommending for supposedly independent directors with whom it has never engaged or met, and recognizes the inherent issue this situation presents, is deeply concerning. As ISS states, "Concerns regarding board independence are underscored by the fact that despite the company's praise for the quality of its independent directors, none of these directors participated in the engagement with ISS; the discussion was led entirely by management."
- Nano's abuse of its classified Board structure, Mr. Stern's egregious service agreement and myriad other corporate governance failings ? ISS supported Murchinson's proposal to de-stagger the Board, while also writing, "There are significant concerns with the company's governance structure. Among other things, the board is classified, the CEO has the right to approve new directors, the company has not put the renewal of the CEO's contract to a shareholder vote eight months after it expired despite a statutory requirement to do so, and directors have been shuffled between classes, which has deprived shareholders of their right to opine on nominees."
- Mr. Stern's bullying tactics ? ISS does not take a stance on Mr. Stern's threats to quit if even a single independent director is elected, which Murchinson believes could set a terrible precedent by effectively approving of executives putting their personal interests ahead of shareholders in contested elections. Further, the Company told ISS that if no independent nominees are elected, it will look to call ANOTHER special meeting in 45 days to approve Mr. Stern's service agreement. Why was Mr. Stern's contract not included for vote at this meeting? Would the Company be without a CEO for the 45 days? Murchinson believes the fact the Board allows this behavior to continue speaks volumes.
In addition, Murchinson believes there are several areas where ISS simply misinterpreted the harsh reality at Nano or reached the wrong conclusion. The facts are:
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Nano Dimension has underperformed for shareholders ? Since Mr. Stern was appointed Chairman in March 2021, Nano Dimension's stock price has lost 73% of its value.3 It has also underperformed its self-proclaimed closest peer Stratasys by 34% over the same time period.
Further, ISS does not sufficiently address that Nano's cash balance ? not Company performance ? supports its stock price. ISS discusses that the Company is trading at a discount to cash as a result of a lack of investor confidence but gives Nano credit for recent TSR performance. This conclusion about TSR makes no sense.
- ISS gets the Stratasys debacle wrong ? ISS states that it is "unclear how much the failed attempt to acquire SSYS ultimately cost the company." While Nano's typical lack of disclosure makes it very difficult to truly determine exactly how much shareholder value was squandered, ISS does not discuss the overwhelming third-party criticism and clearly "last ditch" entrenchment motivations related to the gambit. For more information, Murchinson encourages shareholders to review the investor presentation available here.
For more information on Murchinson's campaign, shareholders are encouraged to visit: www.SaveNanoDimension.com
Shareholders have the opportunity to vote at the upcoming Annual General Meeting of Shareholders. Investors should be mindful that all votes must be received by 12:00 p.m. E.T. on August 31, 2023, and, in any event, should correspond with their bank or broker to ensure their vote is counted.
If shareholders have questions about how to vote their shares, please contact Okapi Partners at (844) 202-7428.
Additional Information and Where to Find It
In connection with the Meeting, Murchinson will make available to the Company's shareholders of record a proxy statement describing the various proposals to be voted upon at the Meeting, along with a proxy card or voting instruction form enabling them to indicate their vote on each matter. Murchinson has also furnished copies of the proxy statement, the proxy card and voting instruction form to the SEC as exhibits to the Schedule 13D amendment we filed with the SEC, which may be obtained for free from the SEC's website at www.sec.gov, as well as at the following website: www.SaveNanoDimension.com.
About Murchinson
Founded in 2012 and based in Toronto, Canada, Murchinson is an alternative asset management firm that serves institutional investors, family offices and qualified clients. The firm has extensive experience capturing the best returning opportunities across global markets. Murchinson's multi-strategy approach allows it to execute investments at all points in the market cycle with fluid allocation between strategies. Our team targets corporate action, distressed investing, private equity and structured finance situations, leveraging its broad market experience with a variety of specialized products and sophisticated hedging techniques to deliver alpha within a risk-averse mandate. Learn more at www.murchinsonltd.com.
Cautionary Statement Regarding Forward-Looking Statements
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Disclaimer
The information contained or referenced herein is for information purposes only in order to provide the views of Murchinson and the matters which Murchinson believes to be of concern to shareholders described herein. The information is not tailored to specific investment objections, the financial situations, suitability, or particular need of any specific person(s) who may receive the information, and should not be taken as advice in considering the merits of any investment decision. The views expressed herein represent the views and opinions of Murchinson, whose opinions may change at any time and which are based on analyses of Murchinson and its advisors.
1 Permission to quote ISS was neither sought nor obtained. Emphases added.
2 ISS is referring to litigation filed in the Israeli Courts by Nano challenging the results of the March Special Meeting called by Murchinson on March 20, 2023 ("March EGM"), given that a decision is not expected until well after the Nano Annual Meeting.
3 From March 11, 2021 when Yoav Stern was appointed to the Board and named Chairman to August 8, 2023 when Nano filed the amended proxy for the AGM.
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