Intel is facing a class action lawsuit brought by some of its own shareholders, in a case that specifically names Intel CEO Pat Gelsinger and CFO David Zinsner among the defendants. The case alleges that Intel engaged in a “fraudulent scheme,” by failing to inform investors about the scale of losses endured by its chip-making foundry business.
Intel’s share price has had a rough ride lately, plummeting from $47.80 at the start of 2024 to just $19.64 right now, with a particularly sharp drop after its Q2 2024 financial results were announced, along with a plan to lay off over 15,000 workers. Meanwhile, the best gaming CPUs made by Intel are having to be fixed by microcode updates to stop them crashing.
This particular case was filed in San Francisco federal court by Construction Laborers Pension Trust of Greater St. Louis, which says it bought 35,700 shares in Intel on January 2, 2024 for $43.34 each, and is now bringing the case “on behalf of all purchasers of Intel common stock between January 25, 2024 and August 1, 2024, inclusive.”
The thrust of the case, according to the filing, is that Intel made “materially false and misleading statements” to hide the financial problems with its foundry business from shareholders, adding up to a “fraudulent scheme alleged herein.” According to the filing, “unbeknownst to investors… Intel’s foundry business was floundering, costing billions of dollars more than investors had been led to believe.”
The filing states that in actuality “Intel’s foundry unit had suffered a negative 37% operating margin in 2023 and was years away from positively contributing to the Company’s profits margins,” and that “Intel was running years behind its stated long-term profitability targets of 60% gross margins and 40% operating margins,” while “such targets lacked a reasonable factual basis.”
According to the filing, Gelsinger and Zinsner are specifically named as defendants because, as individuals, they “were involved in drafting, producing, reviewing, and/or disseminating the false and misleading statements and information alleged herein, and were aware of, or recklessly disregarded, the false and misleading statements being issued about Intel and approved or ratified these statements, in violation of the federal securities laws.” The filing demands a trial by jury.
In other news, the new Intel Arrow Lake desktop CPU lineup is expected to launch later this year.
