On Tuesday, plaintiff Edith Liss filed a derivative shareholder complaint against nominal defendant Intel Corporation and several Intel officer and director defendants for breach of their fiduciary duties and other legal violations. The complaint centers on Intel’s repeatedly delayed rollout of a new seven-nanometer chip that the plaintiff contends caused the company’s share price to fall over 22% this summer.
The filing alleges that the defendants misrepresented the timeline of the development and manufacture and Intel’s seven-nanometer chip during the relevant period, Oct. 25, 2019 until Jul. 23, 2020. The complaint points to several events and statements from the company demonstrating that it knew, or recklessly disregarded, “that as a result of a material defect in Intel’s manufacturing process, the Company could not timely launch its next generation seven-nanometer chip.”
The complaint cites the hiring of a renowned microchip specialist in April 2018, “to address Intel’s flawed execution in the development and production of its 10-nanometer chips…” The filing contends that Intel knew, given its previous problems with the ten-nanometer chips, that the seven-nanometer’s planned 2021 debut was “critically important to Intel and its investors.”
The plaintiff alleges that Intel made repeated assurances that it would meet this deadline. Yet, in June, the complaint claims, the truth about the chip launch emerged. First, the microchip specialist reportedly and abruptly departed Intel for “personal reasons,” which was a “surprise to many in the industry.” Next, the company revealed substantial changes to its leadership, causing the stock price to decline by 6.5%, the plaintiff contends.
In July, the filing states, “Intel shocked investors when it revealed that production of its seven-nanometer chips was a full 12 months behind schedule, and would not be arriving until later 2022 or early 2023,” attributing the delay to a “defect” in the manufacturing process. In addition, to resolve the issue, Intel reportedly stated that it would use a competitor’s manufacturing facilities if it was unable to resolve the problem quickly.
According to the shareholder’s complaint, these disclosures caused the share price to fall 16.2% to close at $50.59 down from $60.40 per share. Later in the month, Intel again announced “sweeping” changes to the structure of the company sub-division responsible for microchips, the complaint states.
For the alleged harm, the plaintiff seeks declaratory relief, damages, disgorgement from the individual defendants, and an award of her attorneys’ fees and litigation costs, among other requests. The instant action follows an August-filed Intel shareholder suit that made similar allegations.
The plaintiff is represented by deLeeuw Law LLC.
