Oracle shares fell 5% after bondholders sued over undisclosed AI-related borrowing plans

Oracle shares fell 5% in afternoon trading on the New York Stock Exchange after bondholders filed a lawsuit against Larry Ellison, several senior executives, and a long list of underwriting banks over the company’s AI debt problem.

The lawsuit landed on Wednesday in a New York state court in Manhattan. It was filed as a proposed class action by investors who say they bought $18 billion of senior notes and bonds issued on September 25.

That sale came shortly after the company signed a $300 billion, five-year deal to provide computing power to Sam Altman’s OpenAI. Bondholders say the timing mattered. They argue the company already knew it would need far more debt to deliver on that deal.

Bondholders accuse Oracle of hiding AI borrowing plans

The investors say the problem showed up just seven weeks later. Oracle went back to the capital markets and raised $38 billion in loans. The money was set aside to build two new data centers in Texas and Wisconsin, both tied directly to the OpenAI contract. Bondholders say they were blindsided by that move. They argue the added borrowing crushed the value of the bonds they had just bought.

In court filings, bondholders said the bond market reacted fast. Prices dropped. Yields jumped. The debt began trading closer to lower-rated companies because the risk profile changed. The notes and bonds carried low investment-grade ratings, but the sudden jump in leverage pushed spreads wider. One filing said the market response was swift and bracing as investors reassessed credit risk almost overnight.

The group is being led by the Ohio Carpenters’ Pension Plan. They claim the bond offering documents were misleading. Those documents said the company “may” need to borrow more money in the future. The lawsuit argues that the wording was false because the borrowing was already planned. The investors say the company had no uncertainty at all. The debt was coming either way.

The lawsuit names Oracle, Larry Ellison, former chief executive Safra Catz, chief accounting officer Maria Smith, and 16 underwriting banks. The bondholders say all defendants are strictly liable under the Securities Act of 1933. They are seeking unspecified damages tied to losses on the bonds and notes.

By the end of November, Cryptopolitan reported that Oracle had about $108 billion in outstanding notes and other borrowings.

Analyst makes bullish call on ORCL despite widespread bearish sentiment

Market technicians are also watching price levels closely. Oracle has stabilized between $190 and $195, an area tied to long-term support on weekly charts.

Weekly stochastics are turning up from oversold levels below 20%, and the weekly MACD histogram has risen for four straight weeks. On the daily chart, the MACD showed a bullish divergence in December as price made a lower low while momentum made a higher one.

Fairlead’s Katie Stockton said, “We are intrigued by the setup, noting ORCL has stabilized near long-term support from the weekly cloud model, which spans from $190 to $195.” She pointed to the 50-day moving average near $210 as the first hurdle. She added, “A breakout above the 50-day would target a Fibonacci retracement level near $242, which is 22% above current levels.”

Katie also said the stock is deeply oversold versus the S&P 500, with DeMARK indicators flashing signals seen before past periods of outperformance over a six to eight-week window.

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