Intel faces a securities class action lawsuit brought forth by several shareholders, targeting CEO Pat Gelsinger and CFO David Zinsner among others as defendants, amidst allegations stemming from a category motion filing. The lawsuit claims that Intel concealed a “deceptive scheme” from consumers by omitting crucial information about the significant financial struggles faced by its chip manufacturing subsidiary, thereby misleading investors and shareholders.
Intel’s stock value has had a tumultuous ride recently, plummeting from $47.80 at the start of 2024 to just $19.64 today, with a precipitous drop following its Q2 2024 financial results and announcement to cut more than 15,000 employees? While Intel’s top gaming CPUs struggle with stability issues, they require frequent microcode updates to prevent crashes from occurring in the meantime.
This specific case was brought before a San Francisco federal court by the Building and Construction Tradesmen’s Pension Plan of Saint Louis. Louis claims to have acquired 35,700 shares of Intel on January 2, 2024 at $43.34 each, and is now bringing a lawsuit “on behalf of all investors who purchased Intel securities between January 25, 2024 and August 1, 2024, inclusive.”
The central argument presented in the complaint is that Intel deliberately disseminated “materially false and misleading statements” to conceal the financial struggles of its foundry business from investors, including a purported “fraudulent scheme” allegedly described in the filing. Unbeknownst to buyers, Intel’s foundry operation was facing significant difficulties, resulting in billions of dollars more in costs than investors had been led to believe.
According to Intel, its foundry unit recorded a significant 37% decline in working margin in 2023, making it a substantial drain on the company’s earnings. Moreover, Intel was operating several years behind its long-term profitability targets of 60% gross margins and 40% working margins, which, without an empirical basis, remained aspirational rather than achievable.
The lawsuit names Gelsinger and Zinsner as defendants due to their involvement in drafting, reviewing, producing, and disseminating allegedly false and deceptive statements, as individuals who were aware or recklessly disregarded the fact that such statements were being made about Intel, thereby violating federal securities laws; the filing seeks a jury trial.
The newly announced Intel Arrow Lake desktop CPU series is expected to hit the market sometime this year.
