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[Anandtech] AMD To Face Securities Fraud Lawsuit

4K views 52 replies 25 participants last post by  Deepblue77 
#1 ·
http://www.anandtech.com/show/9132/amd-to-face-securities-fraud-lawsuit

"In a bit of news that's unfortunately not an April Fool's joke, a US District Court has ruled that AMD must face claims from investors over potential securities fraud committed by the company.

At the heart of the matter is AMD's Llano APU. Launched in 2011, in Q3 of 2012 AMD had to take an inventory write-down of $100 million on unsold Llano inventory, as the company had to further reduce prices on the chips in order to sell them in the face of competition from Intel along with the ramp-up of their own Trinity APUs. The writedown in this case did not directly cost the company $100M, but it essentially reduced the value of the company by that much to AMD's shareholders, whose stock in turn suffered a hit in value.

What makes this writedown lawsuit material are the events that led up to it and how AMD handled it. The participating investors are accusing AMD of committing securities fraud over how they presented the state of Llano production. The suit claims that Llano production was not as strong as AMD was claiming - a consequence of supply issues with GlobalFoundries' 32nm process - and as a result AMD artificially inflated the value of the company in 2011 and 2012, and in the process produced too many Llano chips once GlobalFoundries was finally able to catch up. This in turn led to AMD's $100M writedown and overall decline in value of the company and its stock price (with AMD losing about ¾ of its peak value in 2012).

These types of lawsuits are not particularly uncommon, especially as institutional investors seek restitution for money they lost from the drop in stock price. That said, today's ruling is only over whether the lawsuit can go to trial and not over the validity of the claims themselves, never mind what specifically the investors are asking for. So it is likely that the actual lawsuit will take quite a bit longer to resolve."

I guess stuff like this is why Dirk Meyer was ousted. Their stock at the time did seem artificially high.

This is 100% exactly why AMD can't officially say stuff on the record anymore like a certain card. I.e Fiji.

It's why rumors are a lot safer way to release information.
 
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#2 ·
Oh boy here we go...
 
#4 ·
Quote:
Originally Posted by tajoh111 View Post

This is 100% exactly why AMD can't officially say stuff on the record anymore like a certain card. I.e Fiji.

It's why rumors are a lot safer way to release information.
I somewhat agree, but the problem is, that will only make things more difficult to prove. If it can be proved (by a court order to look at their emails) that they are leaking inside information, then people will still go to jail and AMD will still be fined.
 
#5 ·
Quote:
Originally Posted by 47 Knucklehead View Post

I somewhat agree, but the problem is, that will only make things more difficult to prove. If it can be proved (by a court order to look at their emails) that they are leaking inside information, then people will still go to jail and AMD will still be fined.
Go to jail for what? You sound like you haveno understanding of the securities laws.
 
#6 ·
Quote:
Originally Posted by Deepblue77 View Post

Go to jail for what? You sound like you haveno understanding of the securities laws.
Check out SEC rule 10b5

"The "manipulative and deceptive devices" prohibited by Section 10(b) of the Act and Rule 10b-5 thereunder include, among other things, the purchase or sale of a security of any issuer, on the basis of material nonpublic information about that security or issuer, in breach of a duty of trust or confidence that is owed directly, indirectly, or derivatively, to the issuer of that security or the shareholders of that issuer, or to any other person who is the source of the material nonpublic information."
 
#8 ·
Quote:
Originally Posted by svenge View Post

Interesting case, but aren't these things somewhat hard to prove in court?
Very.

You pretty much need a smoking gun (emails, etc) or someone on the inside to cut a deal in exchange for testimony.

But many famous people have been convicted of it. Take George Soros for example. He was convicted, he appealed, and he lost his appeal. He is now appealing the appeal.
 
#9 ·
Quote:
Originally Posted by 47 Knucklehead View Post

Check out SEC rule 10b5

"The "manipulative and deceptive devices" prohibited by Section 10(b) of the Act and Rule 10b-5 thereunder include, among other things, the purchase or sale of a security of any issuer, on the basis of material nonpublic information about that security or issuer, in breach of a duty of trust or confidence that is owed directly, indirectly, or derivatively, to the issuer of that security or the shareholders of that issuer, or to any other person who is the source of the material nonpublic information."
Man, you're quick on the draw!
No BS, lol.
 
#10 ·
Quote:
Originally Posted by hanzy View Post

Man, you're quick on the draw!
No BS, lol.
It was all those business and business law courses I took in my undergrad days.
biggrin.gif


I'm no expert by any stretch of the imagination, and in all honestly, I've learned more since college as an officer of the company I work for, than while in college.

But there are very stiff penalties when you leak of provide false information that will effect stock prices or sale.

If you are an officer of the company and you wish to buy or sell your stock, you have to file 6 months in advance your intent to buy/sell just to avoid violating 10b4 (yet another section).
 
#15 ·
Quote:
Originally Posted by geoxile View Post

Didn't investors already try suing AMD over this once in the past?
Yes for the same thing. Pretty sure this will get thrown out with it. Investment has risks. The investors can go cry a river if they didn't do homework.
 
#16 ·
Quote:
Originally Posted by 47 Knucklehead View Post

Very.

You pretty much need a smoking gun (emails, etc) or someone on the inside to cut a deal in exchange for testimony.

But many famous people have been convicted of it. Take George Soros for example. He was convicted, he appealed, and he lost his appeal. He is now appealing the appeal.
What AMD is accused of is only provable if the people in charge cashed out and made money doing it. if there was no profit and no evidence that they INTENTIONALLY mislead investors, this case will be DOA. The intentional misleading of investors is hard but not impossible to prove, the cashing in on it is even easier to prove. However, without both, you have no case.
 
#17 ·
Quote:
Originally Posted by damric View Post

Yes for the same thing. Pretty sure this will get thrown out with it. Investment has risks. The investors can go cry a river if they didn't do homework.
It actually the opposite.

http://www.reuters.com/article/2015/04/01/us-usa-adv-micro-dev-lawsuit-idUSKBN0MS58E20150401

AMD tried to get it thrown out already and the judge said the case is valid and AMD must face this claim.

"(Reuters) - U.S. chipmaker Advanced Micro Devices must face claims that it committed securities fraud by hiding problems with the 2011 launch of a new computer processor that eventually led to a $100 million writedown, a federal judge in Oakland, California, ruled.

In an order on Tuesday, U.S. District Judge Yvonne Gonzales Rogers said plaintiffs have supported their claims that Advanced Micro officials misled them by stating in the spring of 2011 that problems with the new processor were in the past.

Plaintiffs' lawyer Jonathan Gardner said he was pleased with the decision. Lawyers for Advanced Micro could not immediately be reached for comment."

You can't mislead investors to shore up share price. E.g AMD can't release slides on the record of Fiji's performance beating Titan x easily and afterwards, have it drastically underperform those figures.

Lie to investors and you not only lose the trust of the investors, you face potential fraud charges like this.
 
#18 ·
Sounds similar to a case against NV a while back.. Lol
Is this payback for the 970 complaint?
tongue.gif

It would be hard to prove malicious intent... But who knows... Lol

Tell me one Management team that discloses all
bad news to the investors , and I will be impressed.
tongue.gif
 
#19 ·
Short of a bombshell email or phone call stating that AMD knew that things would be as bad as they were regarding it's production of Llano, I personally don't think the case has much standing, but I assume this will be meted out during discovery, but I'm definitely no lawyer.

Anyways, this just indicates just how little faith some investors have in AMD at this point, where even as the company is basically treading water, the investors suing AMD think it's more likely to gain from suing the already beleaguered firm rather than letting them develop new products unhampered.
 
#20 ·
Quote:
Originally Posted by Shatterist View Post

Anyways, this just indicates just how little faith some investors have in AMD at this point, where even as the company is basically treading water, the investors suing AMD think it's more likely to gain from suing the already beleaguered firm rather than letting them develop new products unhampered.
Even without knowing the actual merit of the lawsuit, I think they're probably not wrong in that respect.
 
#21 ·
hmm funny how noone sued microsoft over the windows mobile debacle. they wanted to educate their customer base too, but when amd wants to educate people to forget discrete gpus and claim that apus are the future, and then apus dont get sold, then its a lawsuit lol

anyway these days corporations have it really easy, they pay 10% of the sum to SEC, SEC declares victory and corps get a tiny little cause in settlement contract, that they get immunity from civilian litigation.

so i guess amd should call SEC to get an agreement like that to throw out the suit
or maybe sheiks from abu dhabi make a call to DC. how much does abu dhabi have these days in amd stock?
 
#22 ·
Quote:
Originally Posted by revro View Post

hmm funny how noone sued microsoft over the windows mobile debacle. they wanted to educate their customer base too, but when amd wants to educate people to forget discrete gpus and claim that apus are the future, and then apus dont get sold, then its a lawsuit lol

anyway these days corporations have it really easy, they pay 10% of the sum to SEC, SEC declares victory and corps get a tiny little cause in settlement contract, that they get immunity from civilian litigation.

so i guess amd should call SEC to get an agreement like that to throw out the suit
or maybe sheiks from abu dhabi make a call to DC. how much does abu dhabi have these days in amd stock?
Abu still holds most of it AFAIK.
 
#24 ·
#26 ·
Sometimes I wonder how AMD still alive.
Not that their GPUs and APUs were bad. But how they function financially and how horrible their management is, that amazes he that they are still alive.
Truly someone needs to buy them out and cut the rotten parts out.
 
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