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March 3, 2015

IBM sued over alleged money-losing semiconductor offload

IBM sued by shareholder who alleges stock inflation before sale of unit

By CBR Staff Writer

IBM is facing a securities allegation after court papers where filed by a shareholder who says it committed securities fraud, reports Reuters.

The complainant alleges that IBM inflated its stock prices by failing to record its semiconductor unit before its Q3 2014 results in October last year.

The entire unit’s value had fallen to around $1 billion, including personnel and intellectual property, meaning that hard assets probably had no or negative market value.

On 20 October 2014, it sold the unit for $1.5 billion to GlobalFoundries, an affiliate of Abu Dhabi investment fund Mubadala Development, and took a related $4.7 billion pre-tax charge.

The complaint says that before selling the unit, IBM inflated its stock price by carrying the unit’s property, plant and equipment assets on its books at $2.4 billion, when it should have known the assets were worthless.

IBM’s share price fell 9% over the next two trading days after the unit’s sale, wiping out more than $18 billion of market value.

The lawsuit names three IBM officials as defendants and it seeks class-action status on behalf of shareholders from 17 April to 17 October 2014.

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"Defendants presented a misleading picture of IBM’s business and prospects," the complaint said.

"When the truth about the company was revealed to the market, the price of IBM common stock fell precipitously," they added.


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