MakerBot, Stratasys Hit with Class-Action Lawsuit Alleging Investors Deceived, and Defective 3D Printers

Makerbot Faulty PrintersA class-action lawsuit filed on July 1st alleges that, between January 6, 2014 and April 28, 2015, Makerbot founder Bre Pettis, former CEO Jennifer Lawton, and executives at Stratasys knowingly sold faulty fifth-generation Makerbot 3D printers that were “severely defective, frequently clogging with filament and rendering” making the printers inoperable”

The lawsuit also claims that Makerbot and Stratays “engaged in a fraudulent scheme to artificially inflate the company’s stock price by both misrepresenting and concealing the true operational and conditions of the company and its indirect, wholly owned subsidiary, MakerBot Industries.” The class-action lawsuit was filed by Mineworkers’ Pension Scheme and Macomb County Employees’ Retirement System, and is a federal-securities class-action lawsuit against Stratasys and certain of its officers for violations of U.S. federal securities laws.

In August 2013, Minnesota-based Stratasys purchased Makerbot for $493.7 million. at which time Makerbot’s stock was worth about $90, which has currently dropped to approximately $34.00.

Aggressive Growth Strategy

Details of the lawsuit contend that in pursuit of an aggressive sales growth strategy designed to keep up with encroaching competition, Makerbot and Stratasys allegedly rushed MakerBot’s fifth-generation printers to the market despite their alleged knowledge of “serious quality and reliability issues plaguing the printers.” Most significantly, according to the lawsuit, the Smart Extruder promoted by Makerbot and Stratasys defendants was “severely defective.”

The lawsuit contends that because the new MakerBot printers were so “poorly designed and manufactured,” there was a significant number of returns, repairs, and replacement printers. The plaintiffs argue that Smart Extruders were costly to MakerBot, given that the fifth-generation printers were under warranty. The lawsuit alleges that replacements were “equally flawed and prone to failure,” which further “inflated …costs.” Consequently, the company was forced to incur “substantial warranty-related charges and reserves,” which in turn hurt profit margins.

The lawsuit goes on to argue that these quality and reliability problems “severely curtailed the sales growth of MakerBot.” It also alleges that the company “touted MakerBot sales growth driven by early sales of fifth-generation printers,” but that the defendants allegedly “knew that MakerBot’s early sales results and growth projections were illusory.”

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