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Stratasys Ltd. (SSYS - Analyst Report), a 3D printing company, is set to raise $418.5 million by selling 4.5 million of its common shares at a price of $93.0 per share. Its share price fell 5.6% following the announcement, resulting in a market cap of $3.6 billion. It expected net proceeds of $402.2 million from the offering. Shareholders most likely didn’t appreciate the earnings dilution, sending prices down 5.9%.

JP Morgan (JPM - Analyst Report) will be the sole book-running manager while Piper Jaffray, Morgan Stanley, BofA Merrill Lynch, and Needham & Company will act as co-managers for the proposed offering. The underwriters have a 30-day option to purchase an additional 675,000 of ordinary shares of the company.

The current capital raising initiative comes at an opportune time as the company has been performing well over the past few quarters. Stratasys also stated that the secondary offering will boost its cash reserves to over $500 million. Stratasys had $148.9 million in the form of cash and cash equivalents as of Jun 30, up from $65.5 million in the previous quarter.

Stratasys will use the proceeds for business purposes, including acquisitions, capital expenses and working capital. A registration statement and a preliminary prospectus supplement related to the offering have been filed with the Securities and Exchange Commission (SEC) and the final prospectus supplement will be filed soon.  

Earlier, the company bought 3D printing company MakerBot Industries LLC for a stock deal worth $403 million. The acquisition brings together two industry leaders with advanced 3D printing technology. The combined resources will also result in improved offerings, which could lead to an increase in product adoption.

Additionally, the second-quarter results were encouraging with adjusted earnings per share and revenues improving on a year-over-year basis. Its Product and Services revenues also increased significantly.

However, we are a little concerned, as the company has not been doing very well in the European region. Moreover, Stratasys’ continuous investments (acquisitions, integration activities and cross-selling initiatives) led to higher operating expenses and eventually to an operating loss.

Currently, Stratasys has a Zacks Rank #3 (Hold). Other stocks such as Electronic For Imaging Inc. and Alps Electric Co. Ltd. (APELY), with a Zacks Rank #1 (Strong Buy) and Zacks Rank #2 (Buy), respectively are also worth considering.

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