New class-action lawsuit accuses HP execs of misleading investors

HP’s decision this past August to kill off webOS devices and spin off its PC division came as a shock to many in the tech industry- especially since the company’s flagship tablet, the HP TouchPad, was discontinued a mere 48 days after its release. Shares of the company dropped 20 percent after the announcement- its biggest single-day drop since 1987.

Now, Reuters is reporting the first class-action lawsuit accusing HP of misleading investors was filed this week in the U.S. District Court of California by Robbins Geller Rudman & Dowd LLP on behalf of shareholder Richard Gammel. Gammel accuses HP executives including CEO Leo Apotheker and CFO Cathie Lesjak of “misleading investors by making positive statements about the company’s performance that later proved unfounded,” the article states. It also alleges HP concealed the fact that its business model was not working, with webOS at its center.

From the official Press Release:

According to the complaint, the true facts, which were known by the defendants but concealed from the investing public during the Class Period, were as follows: (a) HP’s business model was not working, as the Company was unable to leverage its extensive portfolio and scale of products and services in a strategically beneficial manner; (b) webOS, the TouchPad and the PC business were not central to HP’s business model and webOS would not be integrated across the Company’s entire product line; (c) the TouchPad hardware was inefficient, limiting the degree of effectiveness of the webOS operating system; and (d) based on the foregoing, defendants lacked a reasonable basis for their positive statements about HP’s turnaround, revenue growth rates, market share, new product introductions, diluted EPS, and the Company’s ability to deliver upon its long-term growth model.

The lawsuit argues that HP’s shares were artificially inflated leading up to the announcement even though those familiar with the matter internally sought to keep it quiet. The class-action suit hopes to recover unspecified damages on behalf of those that bought into HP stock between November 22, 2010, and August 18, 2011.

The complaint in its entirety can be viewed here (PDF).

More information on the filing can be found here.

Source: Reuters.com, RGRDLaw.com