Oracle sued by bondholders over losses tied to AI buildout

Oraclewas sued on Wednesday by bondholders who say they suffered losses because the company chaired by billionaire Larry Ellison failed to disclose it needed to sell significant additional debt to build out its artificial intelligence infrastructure.

The proposed class action was filed in a New York state court in Manhattan on behalf of investors who bought $18 billion ofnotes and bondsthatOracleissuedon Sept. 25, two weeks afterOracleannounced a $300 billion, five-year contract tosupply OpenAIwith computing power.

These investors said they were blindsided whenOraclereturned to the capital markets seven weeks later to obtain $38 billion of loans to fund two data centers to supportthe OpenAI agreement.

“The bond market’s reaction toOracle’s additional debt was swift and bracing,” as prices fell and yields rose onOracle’s debt because investors perceived higher credit risk, the bondholders said.

According to the complaint,Oracle, Ellison, former Chief Executive 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 offering documents for the $18 billion debt sale. The bondholders are seeking unspecified damages.

Oracledid not immediately respond to a request for comment.