New York | Jan 14 — GeokHub U.S. software giant Oracle is facing a lawsuit from bondholders who claim they suffered financial losses after the company allegedly failed to disclose the full extent of borrowing required to fund its large-scale artificial intelligence expansion.
The proposed class action, filed Wednesday in a New York state court in Manhattan, was brought on behalf of investors who purchased $18 billion in Oracle notes and bonds issued on September 25. The bond sale came shortly after Oracle announced a $300 billion, five-year agreement to supply computing power to OpenAI.
According to the lawsuit, investors were caught off guard when Oracle returned to capital markets roughly seven weeks later to secure $38 billion in loans to finance the construction of two massive data centers designed to support the OpenAI partnership.
Bondholders argue that the additional borrowing sharply increased Oracle’s credit risk, triggering an immediate decline in the value of existing bonds. The debt began trading at yields and spreads typically associated with lower-rated issuers, despite carrying low investment-grade ratings at the time of issuance.
The plaintiffs, led by the Ohio Carpenters’ Pension Plan, contend that Oracle’s bond offering documents were misleading. While the company stated it might need to raise additional debt, investors allege Oracle was already planning substantial borrowing when the bonds were sold.
The lawsuit names Oracle, company chair Larry Ellison, former chief executive Safra Catz, chief accounting officer Maria Smith, and 16 underwriting banks as defendants. The bondholders claim the defendants are liable under the U.S. Securities Act of 1933 and are seeking unspecified damages.
Oracle declined to comment on the lawsuit. Attorneys representing the bondholders did not immediately respond to requests for comment.
As of the end of November, Oracle reported approximately $108 billion in outstanding debt, including notes and other borrowings. The company’s shares fell about 5% in afternoon trading on the New York Stock Exchange following news of the legal action.
