(Reuters) – Oracle was sued on Wednesday by bondholders who say the company, chaired by billionaire Larry Ellison, suffered losses after failing to disclose that it would need to sell significant amounts of additional debt to build out its artificial intelligence infrastructure.
The proposed class action was filed in New York state court in Manhattan on September 25, two weeks after Oracle announced a $300 billion, five-year deal to supply computing power to OpenAI, on behalf of investors who purchased $18 billion in bonds and bonds issued by Oracle.
Those investors said they were blindsided when Oracle returned to the capital markets seven weeks later to obtain a $38 billion loan to fund two data centers to support the OpenAI deal.
“The bond market’s reaction to Oracle’s additional debt was swift and cautious,” bondholders said, as prices for Oracle bonds fell and yields rose as investors perceived increased credit risk.
According to the complaint, Oracle, Ellison, former Chief Executive Officer Safra Catz, Chief Accounting Officer Maria Smith, and the company’s underwriters are strictly liable under federal securities laws for false and misleading statements in filings related to the $18 billion debt sale. Bondholders are seeking unspecified damages.
Oracle did not respond to requests for comment.
