Why Nano Dimension Stock Crashed on Tuesday

Only nine months ago, Nano Dimension (NASDAQ: NNDM) stock was riding high. The 3D printing company had just released preliminary second-quarter results showing an 11% sequential increase in sales, and announced plans to buy rival Desktop Metal (NYSE: DM) for $183 million -- $5.50 per share.

Nano Dimension, however, soon developed cold feet on the deal, and tried to back out.

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By December, the matter was already before the courts, with Desktop Metal suing Nano Dimension for failure to "use reasonable best efforts to obtain regulatory approval as soon as practicable in connection with the merger agreement between the parties," and demanding "specific performance" -- essentially, asking the court to order Nano Dimension to complete the merger, and hand over the cash.

Now it looks like Desktop Metal will get its wish, and Nano Dimension stock is down 16.5% through 11 a.m. ET.

What the judge said

Desktop Metal's complaint asked the court to force Nano Dimension to petition the Committee on Foreign Investment in the United States ("CFIUS") to approve the merger, and then proceed to close the merger within five days of receiving such approval, "all other regulatory conditions hav[ing already] been satisfied under the Merger Agreement," and CFIUS' approval being the only step remaining.

This morning, Desktop Metal announced that the Delaware Court of Chancery has ruled in its favor, "found that Nano materially breached the Merger Agreement, rejected Nano's counterclaims, and granted Desktop Metal specific performance." Within the next 48 hours, Nano Dimension is instructed to execute a national security agreement with CFIUS, and then proceed to close the purchase of Desktop Metal by March 31 (or extend the merger deadline if that's not possible).

What this means for Nano Dimension

Long story short, Nano Dimension has lost this round. The company may try to appeal to the Delaware Supreme Court, then (potentially) to the U.S. Supreme Court. Or Nano Dimension could do what it agreed to do nine months ago, and buy Desktop Metal.

Investors selling Nano stock today, and buying Desktop Metal stock heavily, seem to think that's the most likely result.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.