Intel shareholders have launched a derivative lawsuit against former CEO Pat Gelsinger and current CFO David Zinsner, demanding the return of $207 million in executive compensation following massive losses in the company’s foundry business.
The legal action, filed in federal court in San Jose, targets compensation paid to Gelsinger during his tenure from 2021 to 2023.
The lawsuit, brought by LR Trust, alleges that Intel’s leadership deliberately misled investors about the performance of Intel Foundry Services (IFS), which recorded a staggering $7 billion operating loss in 2023. According to court documents, the situation deteriorated further in 2024, with Q2 losses expanding to $2.83 billion, significantly worse than the $1.87 billion loss reported in Q2 2023.
Shareholders claim that executives breached their fiduciary duties by maintaining an optimistic public stance about IFS despite its failure to attract major customers and mounting operational losses. The lawsuit specifically challenges Intel’s 2024 Proxy Statement, arguing it failed to adequately disclose risks and misrepresented the foundry division’s growth potential.
The legal filing details five key allegations against Intel’s leadership, including claims that IFS’s reported growth metrics were misleading and that the division experienced declining product profit driven by lower internal revenue. These financial struggles ultimately led to company-wide layoffs and the suspension of Intel’s dividend payments.
This derivative lawsuit, which would return any awarded damages to Intel rather than individual shareholders, follows similar legal actions filed in June and August 2024. The mounting legal pressure comes in the wake of Gelsinger’s resignation as CEO in December, marking a dramatic end to his vision of transforming Intel into a major player in the foundry business.
The lawsuit also names various board members as defendants, accusing them of unjust enrichment and wasting corporate assets. Gelsinger had championed Intel’s strategic pivot toward manufacturing chips for external customers when he announced the company’s “internal foundry model” in October 2022, a move that shareholders now claim was mismanaged from the start.