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Did HP Bilk Its Shareholders?
jfruhlinger writes "About a month ago, HP announced that it was getting out of the PC, tablet, and mobile phone business to focus on software services, at which point, rather predictably, HP's stock plunged. Obviously, HP's leadership had been working on this plan for some time before it was announced, which leads to the question: did they deliberately mislead their stockholders by not being more transparent? That's what a shareholder lawsuit against the company alleges. How the courts treat the suit could have interesting implications for how transparent public corporations need to be about future strategy."
Shorter answer: No. Should corporations (really management/boards) have to disclose when they're going to release a new product that's going to be the next iPhone (on the good extreme) or the next Matrix Revolutions (at the other extreme). And what time-horizon are people to use for this crystal-ball gazing? Wouldn't IBM's management have been equally culpable for their decision to leave the PC market? Or how about bet-the-company gambles? I think we probably already have enough "you should have....." lawsuits already.
HP doesn't care about its investors for the same reason CEOs get pay that is too high and HFT continues. Of-course other reasons for not caring about investors is limited liability that the top management of corporations enjoy because government created this moral hazard in the first place. There shouldn't be such a thing as government provided limited liability to corporations.
But the reality is that in the market that is promoted with all this inflation and destruction of investment and savings, there are no investors, the market is turned into a casino, everybody is gambling on price of stock, not investing into a business for long term.
There should not be any government protections to people, who are investors except that contract law needs to be upheld by courts, that's all there is to it, but with all the government destruction of economy, there is so little competition and so little choice of where to invest, that people are stuck with the current casino, seagull management and gambling.
Can investors sue the Federal reserve for DESTROYING their US dollar denominated savings and investments? After all, the US federal reserve is causing money destruction that is causing the federal reserve notes to lose over 10% of value per year.
You can't handle the truth.
It's not if you knew about it and weren't supposed to, it's if you knew about and took action on that information, prior to the information being made public. Insiders obviously knew about the plan, but if they didn't use that information to buy or sell stock prior to the release of the information it is not insider trading.
This lawsuit is not about insider trading. Insider Trading is a criminal case and this is not.
This is a civil lawsuit. I want to say SEC Reg FD (Fair Disclosure), but after reading the article I am not so sure. But it's going to be in that universe. Basically, what the lawsuits says is that company announcements must be fair and tuneful – and that HP’s announcements that their PC and mobile divisions were doing fine (in the sense that they were going to be a ongoing division of the comapny) were a lie. After all you don’t want to buy a pig in a poke.
I am not so sure how seriously I would take this. Back in the 1980’s a lot of companies were sued every time there stock dipped. Lawyers of the ambulance chaser type were always able to find some press release that could provide a fig leaf and then shake down the company. This kind of suit rarely gets far. (vast generalization– your mileage may very)