Oracle Corporation (ORCL) Faces Bondholder Lawsuit Tied to AI Expansion Debt

Oracle Corporation (NYSE:ORCL) is among the stocks with the best earnings growth for the next 5 years. On January 14, Reuters’ Jonathan Stempel reported that bondholders have sued Oracle Corporation (NYSE:ORCL), claiming they suffered losses due to the company’s failure to disclose that it would need to issue significant additional debt to develop its AI infrastructure.

Filed in a New York state court in Manhattan, the proposed class action lawsuit was filed on behalf of shareholders who acquired $18 billion of notes and bonds that were issued in September, the author notes, adding that this was two weeks after the company’s announcement of a five-year contract to supply Microsoft-backed (MSFT) OpenAI in a $300 billion deal.

Investors named in the suit assert that they were not informed when Oracle Corporation (NYSE:ORCL) returned to the capital markets just seven weeks later to seek $38 billion in loans to support its OpenAI collaboration.

“The bond market’s reaction to Oracle’s additional debt was swift and bracing,” the bondholders cited.

On the same day, KeyBanc Capital Markets reaffirmed an ‘Overweight’ rating and $300 on Oracle Corporation (NYSE:ORCL). Regarding the two distinct segments, the firm’s assessment suggests that “either one or both are being undervalued,” resulting in the conclusion that “Oracle’s stock overall remains attractive.”

Oracle Corporation (NYSE:ORCL) is a Texas-based company that provides solutions for enterprise information technology environments. Incorporated in 1977, the company offers Oracle Cloud SaaS, cloud-based industry solutions, Oracle Cloud license and on-premise license, and Oracle license support services.

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Disclosure: None.