Qualcomm, Top Execs Facing Securities Class Action Over Stock Drop Following CFIUS Outreach News

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A proposed class action lawsuit filed against Qualcomm Incorporated and its CEO and CFO seeks to cover shareholders who bought securities in the mobile/wireless technologies company between January 31 and March 12, 2018.

The timeline in the complaint dates back to November 2017, when Broadcom Limited, a Singapore-based designer, developer and supplier of many kinds of semiconductor devices, reportedly announced a series of “unsolicited proposals” to buy all outstanding shares of Qualcomm’s common stock. Such transactions often fall upon the Committee on Foreign Investment in the United States (CFIUS) for review, the case explains, as the agency is tasked with looking over deals “that could result in control of a U.S. business by a foreign person” to gauge any possible effect on national security. 

What investors didn’t know after the proposed transaction was announced, the lawsuit alleges, is that Qualcomm on January 29, 2018, secretly filed a voluntary request for CIFUS to begin an investigation into Broadcom’s actions, a move the 18-page lawsuit describes as “a brazen attempt to frustrate Broadcom’s attempt to acquire the company” while the individual defendants “entrenched themselves in their executive leadership positions.” The effect of Qualcomm's move, the complaint explains, was an Interim Order issued by CFIUS that delayed Qualcomm's annual stockholder meeting and the election of its board of directors, not to mention put Broadcom's proposed merger agreement on hold.

In a March 2018 press release, Broadcom reportedly broke the news of Qualcomm's “secret actions,” accusing the company of “an intentional lack of disclosure” meant to “prevent its own stockholders from voting for Broadcom's independent director nominees.”

Predictably, once Qualcomm’s outreach to the CIFUS became public knowledge, the lawsuit goes on, the price of the company’s common stock “declined substantially.” Throughout the aforementioned timeframe, the case poses, the defendants issued materially false and misleading statements while failing to disclose to investors that Qualcomm had clandestinely engaged with the CFIUS in order to hamper the company’s potential sale.