3D Printering: Makerbot’s Class Action Suit Dismissed

This time last year, Stratasys, parent company of Makerbot, was implicated in a class action suit. Investors claimed Stratasys violated securities laws, and overstated both the performance of the 5th generation of Makerbot printers and the performance of the company itself. Court docs received by Adafruit have revealed this case has been dismissed with prejudice. Makerbot won this one.

The case presented by Stratasys investors relied on two obvious facts. First, the price of Stratasys shares fell far beyond expectations. Second, the extruder for the 5th generation of Makerbot printers – the ‘Smart Extruder’ – was terrible. No one can reasonably dispute these claims; shares of SYSS fell from $120 in September of 2014 to $30 in September of 2015. With many returns to handle, Makerbot quickly redesigned the Smart Extruder.

Both of these indisputable facts are in stark contrast to statements made by Stratasys and Makerbot at the time. In a press release for the 4th quarter 2013 financial results, Stratasys’ expected sales to grow at least 25% over 2013 and stated it was experiencing “strong sales” of its desktop 3D printer. Concerning the Smart Extruder, Makerbot stated this new feature of the 5th generation Makerbots would make them easy to use, and “define the new standard for quality and reliability.”

The facts of this case are not in dispute – Stratasys did not see the growth they expected in late 2013. The Smart Extruder certainly did not make printers more reliable. These facts, however, are not sufficient to violate securities law.  In a wonderful legal turn of phrase, the judge deciding this case called the statements about the quality of the 5th generation Makerbots consisted of, “non-actionable puffery,” and a ‘statement so vague and such obvious hyperbole than no reasonable investor would rely on them.’

Statements made by Stratasys on their financial performance were also found not to be sufficient to violate securities laws. Stratasys did make several statements about negative performance in late 2014 and 2015, and positive statements made earlier did not have an intent to deceive investors.

This is good news for Makerbot. The claims brought by investors in this case had little merit. The case cannot be appealed, and Stratasys is no longer facing a class action suit. Does this news actually matter? Not really; Makerbot is a dead man walking, and 2016 sales will be at levels not seen since 2010 or 2011.

The consumer 3D printing industry is booming, despite the Makerbot bellwether though.

22 thoughts on “3D Printering: Makerbot’s Class Action Suit Dismissed

  1. Without knowing anything about this beyond what I’ve read here, I would say that this is a win for free enterprise. If Makerbot had lost, this could have set a precedent that would have made it more difficult for companies to advertise their products because of a fear of being sued. Seriously, what company out there doesn’t hyperbole in their advertising?
    I could be wrong, but I see this as a good thing.

    1. It’s a win for companies who screw both shareholders and customers by selling a flagship product so unreliable that they allegedly had to fake the shareholder demo by printing out items on older models and placing them on the beds of the newer one because they couldn’t even get enough working units to show off to shareholders.

      1. I guess that is what happens if you stand on the shoulders of other people then turn around a kick them in the face, you end up in midair suspended by nothing but the hot air you are producing, which always runs out in the end.

        Does that sum up what happened?

  2. “This is good news for Makerbot.” Really? Didn’t the judge just say only a fool would take their claims about product performance seriously?

    Investors will now be much more reluctant to back new ideas and companies in the sector. Good for some established players, but bad for new start-ups perhaps?

    1. This isn’t about angel investors or other folks who would be investors in start-ups. This was a suit brought on behalf of retail investors in the stock market, which is only a factor with public companies – companies who had already made a public offering and therefore can’t reasonably be classified as other than established players.

      This is a victory against class action plaintiff attorney trolls. Their business model is to wait for *any* stock to drop more than 5% in a day and immediately begin a search for an “aggrieved” prime plaintiff (“Have you been injured?!”) and try for a big payday.

      At the CalWest school of law in San Diego, there’s a woodcut on the wall of the main stairwell. It is entitled, “The Lawsuit.” It features a cow. A man is pulling on the horns, labeled “The Plaintiff.” Another man is pulling on the tail labeled “The Defendant.” An attorney is seated near the rear of the cow milking it.

      1. Except a lot of “angel investors” are actually fronts for funds and they are increasingly risk adverse given the global economic outlook. The take away message is still the same regardless of the investor type, 3D printer companies are a risk and their claims are dubious, make sure you know the business and the product or you will get burned. Surely you are not nay-saying that?

        1. Oh and yeah I know all about lawyers, I guy once pointed out to me that hit-men were cheaper than lawyers. He was very bitter about how a divorce settlement was manipulated by the legal teams on both sides, but his pithy observation sums things up well enough.

          1. Lawyers are just like politicians. They present you with an ice cream sundae of hope, only when you bite into it, it leaves you with a mouthful of razor blades.

    2. Expected performance. If the people making those claims really knew that the product did not perform, then they won’t had made those claims or even wanted to sell the product. It’s just easy to get lost or be blind to the information when the market was exploding.

      You think the Ultimaker2 had a lot of testing? It was a lucky shot. We still had to improve it with the Ultimaker2+, but it wasn’t anywhere near the 5th gen from Makerbot. I can tell you, there was at least a 10 fold increase in testing effort for the Ultimaker2+ compared to the Ultimaker2.

      We have the advantage of not having external share holders. But still, the whole market was like the wild-west a few years ago. I’m just glad we did well.

  3. ‘Precedents’, ‘free-market victories’ and ‘lawsuit troll lawyers’ aside, I don’t understand why there is such a joyous undertone to this. For me I was torn between wanting MakerBot to be eviscerated for everything they were and what they stood for and wanting the investors to get their hopes up only to be smashed on the sharp rocks of defeat.

    On the one hand I always felt that MakerBot was the EvilEmpire of the 3D printer space. I knew from the start that it would only be a matter of time before it crashed and caused more harm than good to the laymans perception of 3D printing. But on the other hand I wanted to see the investors get their noses rubbed into the mess they helped create by sinking their money into a buzzword tech that they knew very little about and was not ready for that level of exposure.

    Look at where the tech is now… just a couple short years later and completely viable printers can be had starting in the $200 range. 3D printers have gotten to the point that the primary reason keeping them out of /every/ home is no longer price, but application. Once the idea gets refined into a library of real-world, practical, usable items that give every household a use for a 3d printer then 3d printing will truly hit the mainstream.

    Keep in mind that when this was fresh news $400-$1000 for some variant of a RepRap machine was a budget build compared to a commercial offering from the likes of MakerBot. In just the last few months the industry has advanced such that I’m questioning whether to continue my Mendel90 build or puss-out and throw my dollars at a MonoPrice Select for 1/4 the price.

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