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The lawsuit filed in Manhattan federal court
arose from IBM's announcement last Oct. 20 that it would sell
the unit to GlobalFoundries Inc, and take a related $4.7 billion
pre-tax charge.
IBM also announced third-quarter results that day. Its share
price fell 9 percent over the next two trading days, wiping out
more than $18 billion of market value.
The Armonk, New York-based company did not immediately respond
to requests for comment on the suit. Warren Buffett's Berkshire
Hathaway Inc is among IBM's largest shareholders.
According to the complaint, IBM inflated its stock price before
selling the semiconductor unit by carrying the unit's property,
plant and equipment assets on its books at $2.4 billion, when it
should have known the assets were worthless.
The complaint said potential bidders had been unwilling to pay
much more than $1 billion for the entire unit, including
intellectual property and personnel, suggesting that the hard
assets had no or negative market value.
The lawsuit by the City of Sterling Heights Police & Fire
Retirement System in Michigan also named three IBM officials as
defendants, including Chief Executive Virginia Rometty.
It seeks class-action status on behalf of shareholders from
April 17 to Oct. 17, 2014.
"Defendants presented a misleading picture of IBM's business and
prospects," the complaint said. "When the truth about the
company was revealed to the market, the price of IBM common
stock fell precipitously."
GlobalFoundries is an affiliate of Mubadala Development Co, an
Abu Dhabi state investment fund.
The case is City of Sterling Heights Police & Fire Retirement
System v. IBM Corp et al, U.S. District Court, Southern District
of New York, No. 15-01513.
(Reporting by Jonathan Stempel in New York; Editing by David
Gregorio)
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