IBM settles stock class action with $20M payment

While IBM disputes that it made any misrepresentations to investors and denies all allegations of wrongdoing regarding the class action suit, the company has also tangled with the SEC on the same stock matters.

By Suzanne Deffree, Managing Editor, News -- Electronic News, 6/3/2008

IBM has agreed to pay $20 million in cash to settle a class action suit that claimed the company misled investors as to its expected financial results and the anticipated size of its stock-option expense in 2005.

Specifically, the litigation alleged that persons who purchased IBM’s common stock between April 5, 2005 and April 14, 2005 were damaged by misrepresentations and omissions in an IBM April 5, 2005 presentation to investors and analysts that stated the company would begin stock-option expensing in Q1 of that year.

On April 14, 2005, IBM released financial results reporting earnings per share of 85 cents for the Q1, 5 cents below analysts’ expectations based on the IBM April 5 presentation. IBM also disclosed that its equity compensation expense was 10 cents per share for the quarter, or 4 cents lower than what many analysts estimated based on IBM's April 5 presentation. On the results, IBM's stock price dipped 8% to $76.33 on April 15, 2005.

While IBM disputes that it made any misrepresentations to investors and denies all allegations of wrongdoing regarding the class action suit, the company has also tangled with the Securities Exchange Commission (SEC)  on the April statements. In June 2007, IBM settled with the SEC, after the commission took enforcement action against IBM for making "materially misleading statements" in the April 5 presentation.

The class action suit settlement is subject to final court approval.