Intel faces shareholder lawsuit following major stock decline amid job cuts, dividend suspension

Intel shareholder lawsuit 2024: Intel Corporation, the renowned Silicon Valley chipmaker, is facing a lawsuit from shareholders who allege that the company fraudulently concealed significant operational issues that ultimately led to a sharp decline in its stock value. The lawsuit, filed on Wednesday in San Francisco federal court, accuses Intel, along with its CEO Patrick Gelsinger and CFO David Zinsner, of misleading investors about the health of its business operations, particularly its foundry business, which was reportedly struggling despite prior optimistic projections.

The lawsuit claims that Intel's public statements regarding its manufacturing capabilities and overall business outlook were materially false or misleading, leading to an artificial inflation of its stock price from January 25 to August 1, 2024. Shareholders were reportedly caught off guard when Intel revealed on August 1 that its foundry business, which involves manufacturing chips for external clients, was underperforming and incurring billions of dollars in additional costs while experiencing declining revenue.

This revealation, coupled with the announcement of over 15,000 job cuts (more than 15 per cent of its workforce) and the suspension of its dividend starting in the fourth quarter, sent shockwaves through the market. The company, which also reported a $1.61 billion net loss for the second quarter and a 1 per cent decline in revenue to $12.83 billion, saw its stock price plummet by 26 per cent to $21.48 on August 2, the day following the announcement. The decline continued, with shares closing at $18.99 on Wednesday, marking a 34.6 per cent drop since the announcement.

Intel, which has been struggling to maintain its competitive edge against rivals such as Advanced Micro Devices (AMD), Nvidia, Samsung Electronics, and Taiwan Semiconductor Manufacturing Company (TSMC), has yet to comment on the lawsuit. The legal action represents a significant challenge for the company as it undergoes a restructuring aimed at saving $10 billion by 2025 while navigating the rapidly evolving landscape of the semiconductor industry.

(With Reuters inputs.)