More Securities Lawyers Circling HP
In the wake of a proposed class action lawsuit, filed Sept. 13 in the U.S. District Court for Central California (complaint below), four more law firms have said they are launching their own investigations of HP.
The latest came this morning, as Klayman & Toskes, a securities law firm, said it was investigating claims on behalf of shareholders who might be eligible to join the proposed class action. The other three firms that have made similar announcements are Holzer Holzer & Fistel; the Briscoe Law Firm, PLLC; and Powers Taylor, LLP.
In the suit filed Tuesday, an HP shareholder named Richard Gammel alleged that comments by CEO Léo Apotheker — concerning the company’s earnings expectations, the importance of its personal computer business and plans to move ahead with devices running the webOS operating system — gave a vastly different indication of actions HP took on Aug. 18, when it killed the webOS hardware business and announced plans to spin off the PC business and spend $10 billion to acquire Autonomy. Gammel is being represented by Robbins Geller Rudman & Dowd.
During a period starting in November 2010 and ending on August 18, the Gammel suit argues that HP highlighted its ownership of the webOS hardware and software as a key differentiating factor against competitors — “a defining aspect of the company’s value proposition” — and that HP represented to shareholders that webOS, as the “crown jewel” obtained in last year’s $1.2 billion acquisition of Palm, was going to play an integral role in HP’s strategy going forward.
Of course we all know what happened after August 18. HP shares cratered in the days that followed, and traded below $23 a share, down from about $32 days before.
Lawsuits by shareholders are a fairly common response to sudden price drops, especially when they result from the kind of jarring shift in strategic direction that HP decided to make. The trick — and it’s a tough one — is proving that Apotheker and other HP executives made public statements about the state of the business, knowing they were false. And many lawsuits like this get dismissed. HP will have the advantage of being able to argue that Palm was acquired under the previous CEO, Mark Hurd, now a president at Oracle, and that the webOS business wasn’t taking off as originally hoped. We know this much is true, as TouchPad sales proved to be lousy before a drastic price cut spurred demand.