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The class action lawsuit of @makerbot @stratasys begins #makerbusiness

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It looks like the class action lawsuit against Stratasys & MakerBot is proceeding, the latest court docs were filed last week.

This is a federal securities class action against Stratasys and certain of its officers for violations of the federal securities laws. Plaintiffs bring this action under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. §§78j(b) and 78t(a), and SEC Rule 10b-5 promulgated thereunder, 17 C.F.R. §240.10b-5, on behalf of themselves and all persons or entities who purchased or acquired the publicly traded common stock of Stratasys (the “Class”) between January 6, 2014 and April 28, 2015, inclusive (the “Class Period”). Plaintiffs allege that, during the Class Period, Defendants engaged in a fraudulent scheme to artificially inflate the Company’s stock price by both misrepresenting and concealing the true operational and financial conditions of the Company and its indirect, wholly owned subsidiary, MakerBot Industries, LLC (“MakerBot”).

MakerBot Begins to Lose Footing to Competitors …15
D. To Maintain Its Market Position, the Company Rushed MakerBot’s 5th Generation Printers to the Market Despite Severe Quality and
Reliability Issues……….16
1. The Design of the 5th Generation Printers Was Severely Flawed………….18
2. MakerBot’s 5th Generation Printers Suffered from the Use of
Non-Conforming, Uninspected, and Low Quality Materials…………………24
E. Consumers Rejected MakerBot’s 5th Generation Printers, Resulting in
Negative Feedback, Product Returns, and Warranty Claims……………………………26
1. MakerBot Received an Avalanche of Complaints and Negative
Feedback from Consumers After the 5th Generation Printers Were Released ………..26
2. MakerBot Was Deluged with Expensive Product Returns and
Warranty Claims as a Result of the Defective 5th Generation Printers…..27
3. Returns and Warranty Claims Related to the 5th Generation Printers
Were Expensive and Hurt the Company’s Margins …………………………….31
F. MakerBot’s Defective 5th Generation Printers Caused the Company’s Sales Growth to Plummet and Disrupted Its Distribution Channels ………………………….32
1. MakerBot’s Direct Sales of the 5th Generation Printers Were
Especially Poor ………………………………………32
2. MakerBot’s Indirect Sales Through Distributors Were Also Poor…………33
G. Numerous Facts Support Defendants’ Knowledge of MakerBot’s Undisclosed
Problems and Their Impact on the Company ………..34
1. Defendants’ Public Statements Confirmed Their Knowledge of the Problems Associated with MakerBot’s 5th Generation Printers ……………34
2. MakerBot’s Production and Sale of the 5th Generation Printers Were
Core Operations of the Company, Supporting Defendants’ Knowledge…36
3. Former MakerBot Employees Confirmed Defendants’ Knowledge of
the Problems Associated with the 5th Generation Printers……………………38
H. Defendants Misled the Market and Failed to Disclose MakerBot’s Product
Quality Issues and the Resulting Financial Problems Affecting the Company …..39
I. Defendants Were Motivated to Maintain a Positive Market Perception of the Company, and the Company’s Artificially Inflated Stock Value……………………..42
J. The Company’s Stock Price Ultimately Collapsed When the Market Learned
of the True Extent of the Company’s Problems……..43
V. DEFENDANTS’ FALSE AND MISLEADING CLASS PERIOD STATEMENTS
AND OMISSIONS ………………46
A. Defendants’ False and Misleading Statements and Omissions from
January 6 Through May 8, 2014 ………………………….47
1. Press Release and Interview Regarding the Release of MakerBot’s 5th Generation Printers …………………………………47
2. Press Release Regarding the Company’s 2014 Financial Guidance
and Statements at the Needham & Company Growth Conference…………50
3. Press Release, Conference Call, and Annual Filing Regarding the Company’s Fourth Quarter and Fiscal Year 2013 Financial Results ……..52
B. Defendants’ False and Misleading Statements and Omissions from
May 9 Through August 6, 2014…………………………..59
C. Defendants’ False and Misleading Statements and Omissions from
August 7 through November 4, 2014……………………64
1. Press Release, Conference Call, and SEC Filings Regarding the Company’s Second Quarter 2014 Financial Results ……………………………64
2. Statements from the Company’s 2014 Analyst Day Conference Call,
the Announcement of Defendant Pettis’ Removal as MakerBot CEO,
and Media Day Event………………………………69
D. Defendants’ False and Misleading Statements and Omissions from
November 5, 2014 through February 1, 2015………..74
VI. THE TRUTH BEGINS TO EMERGE BUT DEFENDANTS CONTINUE TO MISLEAD THE MARKET …………………………………………..80
VII. THE FULL TRUTH IS FINALLY REVEALED……………..89

Full PDF here, it’s over 125 pages and it’s going to take awhile to digest it all. The stock is taking a hit today.


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