According to Reuters
, IBM has been sued by a shareholder, in this case the Louisiana Sheriffs' Pension & Relief Fund. They claim that the company concealed its ties to the NSA spying scandal which ultimately resulted in reduced business in china and an ultimate market value plunge of $12 billion after IBM's poor earnings showing. Upon doing our own digging, this figure appears to not be accurate if they are actually trying to sue for the losses incurred from the October 16th earnings release.
On October the 16th, IBM's shares slid as a result of their earnings from $186.73 to $174.83 and continued to slide for the following days until hitting a bottom of $172.86. Interestingly enough, since then, the company's stock has since rebounded and fallen and currently sits at an eerily close $172.80.
For those that are not math inclined, today's price and the initial drop represent a price difference of $13.93 (186.73-$172.80). Now, that is a reduction of 7.45% and is certainly considered a significant drop in the share's price. In addition to that, the $13.93 drop represents a loss to the shareholders' equity of nearly $15 billion dollars based on the 1.09 billion outstanding shares of IBM's stock.
Now, according to the suit filed in a Manhattan US District Court, the plaintiff claims that IBM lobbied hard within Congress to allow it to share personal data of customers in China and elsewhere in order to win an NSA bid to protect its IP rights. They said that this move threatened IBM's hardware sales in China, which given the NSA programs that allow them to spy on non-US companies and people using US-based companies. The suit claims that because of all of the NSA revelations regarding Edward Snowden's disclosures, Chinese companies and goverments abruptly severed their ties with IBM. The October 16th earnings report, which caused the stock to slide, reported a drop of 22% in China sales and a 40% drop on hardware sales. Quarterly profit rose 6% while revenue dropped 4%, falling well below analyst expectations.
The lawsuit names the company's CEO Virgina Romett and CFO, Mark Loughridge as defendants and says that they should be held liable for the company's failure to disclose the risks of its lobbying and NSA ties. Judging by an IBM spokesperson's response to the lawsuit, it appears that they are very unsettled by the allegations and perhaps someone will finally be held accountable for their actions in today's corporate society. IBM's spokesman, Doug Shelton stated that, "These allegations are ludicrous and irresponsible and IBM will vigorously defend itself in court." Which, to me, sounds like they are offended by this lawsuit and probably want to make sure that they absolutely and definitively prove no wrongdoing, which may be hard considering IBM's position in the government and enterprise software and hardware businesses.
© 2009 - 2014 Bright Side Of News*, All rights reserved.