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Intel is facing a lawsuit from shareholders who claim the company fraudulently concealed issues that led to weak financial results, significant job cuts, and the suspension of its dividend, resulting in a $32 billion market value drop in a single day. The proposed class action lawsuit was filed on Wednesday in San Francisco federal court, naming Intel, Chief Executive Patrick Gelsinger, and Chief Financial Officer David Zinsner as defendants.
Shareholders allege they were caught off guard when Intel disclosed on August 1 that its foundry business, which manufactures chips under contract for other companies, was “floundering.” This revelation highlighted the company’s financial struggles, including billions in extra costs and declining revenue. The Santa Clara, California-based company is accused of making materially false or misleading statements about its business and manufacturing capabilities, which allegedly inflated its stock price between January 25 and August 1.
In response to its financial difficulties, Intel announced on the previous Thursday that it would lay off more than 15% of its workforce, which amounts to over 15,000 jobs, and suspend its dividend starting in the fourth quarter as part of a restructuring plan aimed at saving $10 billion by 2025. Intel also reported a $1.61 billion net loss for the second quarter, with revenue declining 1% to $12.83 billion.
The company has been struggling to compete with rival chipmakers and capitalize on growth opportunities in the artificial intelligence sector. Following the announcement of its quarterly results, job cuts, and dividend suspension, Intel’s share price plummeted 26% to $21.48 on August 2. The stock continued to decline, closing on Wednesday down 3.6% at $18.99, representing a 34.6% drop since the initial announcement.