Intel beats shareholder lawsuit over $32 billion stock plunge

[Daniel Nenni]

(Reuters) -A federal judge dismissed a lawsuit accusing Intel of defrauding shareholders by concealing problems in a business where it manufactured chips for outside customers, leading to a $32 billion one-day plunge in its market value.

While saying she "understands plaintiffs' frustrations," U.S. District Judge Trina Thompson in San Francisco ruled on Wednesday that Intel did not wait too long to reveal a $7 billion fiscal 2023 operating loss in its foundry business.

Intel's stock price sank 26% last August 2, one day after the chipmaker announced more than 15,000 layoffs and suspended its dividend, hoping to save $10 billion in 2025.

The Santa Clara, California-based company created the foundry business in 2021 to serve customers including Amazon.com and Qualcomm, while still making chips and wafers for internal use.

In a 21-page decision, Thompson said Intel made clear that foundry results would be "obscured" until 2024, meaning its earlier financial reporting was not false and misleading.

Thompson also cited an "overarching policy consideration" that because Intel's public statements suggested a "trial-and-error" approach to the foundry business, the company could have faced risks from reporting preliminary, unaudited data.

The judge dismissed an earlier version of the lawsuit in March. Wednesday's dismissal was with prejudice, meaning the shareholders cannot sue again.

Intel had been accused of inflating its stock price from January 25 to August 1, 2024.

Lawyers for the shareholders did not immediately respond to requests for comment on Thursday. Intel and its lawyers did not immediately respond to similar requests.

Intel has struggled to compete with rival chipmakers such as Nvidia, Advanced Micro Devices, Samsung Electronics and Taiwan's TSMC. and benefit from growth in artificial intelligence.

The company lost $18.8 billion in 2024, its first annual loss since 1986.

The case is In re Intel Corp Securities Litigation, U.S. District Court, Northern District of California, No. 24-02683.

https://finance.yahoo.com/news/intel-beats-shareholder-lawsuit-over-142503984.html

 

[Daniel Nenni]

I hope the plaintiff has to pay defendants costs! Here is an AI summary of the complaint:


The document is a class action complaint filed on May 3, 2024, in the U.S. District Court for the Northern District of California by Plaintiff Patricia Quille against Intel Corporation, CEO Pat Gelsinger, and CFO David Zinsner. The case alleges violations of the federal securities laws, specifically Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5. The complaint centers on misrepresentations and omissions related to Intel's "Internal Foundry Model" (or "IDM 2.0") and the financial performance of its Intel Foundry Services (IFS) division.

The action covers a class period from January 25, 2024, to April 25, 2024, during which Intel is alleged to have made false or misleading statements about the strength and profitability of its Foundry business. Plaintiff claims these statements inflated Intel’s stock price and misled investors about the true financial state of IFS. Key allegations include that Intel:

Misrepresented the growth and profitability of IFS under the new reporting structure.

1. Concealed that the Foundry unit had experienced an operating loss of $7 billion on $18.9 billion in revenue in 2023—a significant decline of $8.6 billion from the prior year.
2. 
   
3. Overstated the benefits and cost-saving potential of the new internal Foundry model.
4. Failed to disclose that IFS’s performance was heavily impacted by reduced internal revenue contributions and that it was not providing the anticipated financial "tailwind."

Two major events triggered sharp drops in Intel’s stock price:

• On April 2, 2024, Intel disclosed the retrospective financial performance of the Foundry unit, including the $7 billion loss, causing shares to drop 8.2%.
• On April 25, 2024, Intel reported Q1 2024 earnings under the new model, revealing a 10% year-over-year decline in Foundry revenue, prompting another 9.2% decline in stock price.

The complaint argues that these disclosures corrected earlier misstatements and revealed the adverse reality to investors, thereby causing economic harm. The lawsuit seeks compensatory damages for the plaintiff and similarly situated investors who purchased Intel stock during the class period.

Plaintiff Quille asserts that Intel and its executives acted knowingly or recklessly, with access to nonpublic financial information that contradicted their public statements. The case relies on the fraud-on-the-market theory, presuming investors relied on the integrity of publicly reported information. It also asserts that the statutory safe harbor for forward-looking statements does not protect Intel in this case, as the company failed to adequately caution investors about the risks involved.

Plaintiff demands a jury trial and seeks class certification, compensatory damages, attorneys’ fees, and other relief the court deems proper.

 

[Barnsley]

What is the point of stuff like this?

Do shareholders pay back anything if the Company pump "value" with fake numbers and make out like bandits.