Choose questions HP’s ‘exaggerated’ Autonomy loss declare

HP’s valuation of Autonomy, the corporate it acquired in 2011 for $11bn and took a $5bn monetary hit on in 2012, is “considerably exaggerated”.

In 2022, HP efficiently argued that Autonomy’s senior administration workforce had inflated the worth of the corporate, which meant HP paid over the chances.

Nevertheless, the newest twist on this ongoing authorized saga means that the $5bn monetary hit HP took could have been its try to counter a fall in market capitalisation by devaluing some HP property.

The 22 July court docket ruling said that HP is owed nearly £700m because of the distinction between the acquisition worth of Autonomy and the value based mostly on the corporate’s true monetary place. Reuters reported that HP can also be entitled to a different $47.5m for losses suffered by Autonomy group corporations in relation to {hardware} gross sales and different transactions.

Nevertheless, Justice Robert Hildyard mentioned: “I think about that HP’s declare was all the time considerably exaggerated: and I’ve concluded that there’s greater than a grain of reality in Dr Lynch’s submission … that when … HP introduced that it was writing down the worth of Autonomy by $8.8bn and attributed some $5bn to alleged fraud, the determine was not based mostly on detailed evaluation. Somewhat, it was predominantly calibrated by reference to the perceived want to scale back the carrying worth of a few of HP’s property to take account of the diminution of HP’s market capitalisation following a fall in HP’s share worth.”

The choose discovered the valuation of Autonomy to be £23.00 per share, in contrast with the acquisition worth HP paid, of £25.50 per share, representing a 9.8% discount.

On 19 August 2024, Autonomy’s CEO and co-founder Mike Lynch died when his luxurious yacht sank in a storm off the coast of Sicily.

In a posthumous assertion, Lynch wrote: “At this time’s Excessive Court docket ruling displays that HP’s authentic $5bn damages declare was not only a wild overstatement – deceptive shareholders – however it was off the mark by 80%. HP acquired Autonomy for $11.6bn and at this time’s judgment is a view that Autonomy’s precise worth was not even 10% under the value HP paid. This consequence exposes HP’s failure and makes clear that the immense harm to Autonomy was right down to HP’s personal errors and actions.”

In June 2024, just a few months earlier than his tragic demise, Lynch was cleared of fraud within the US. Following a 12-week trial in San Francisco, the jury cleared Lynch of 15 counts of fraud and conspiracy that had been introduced in opposition to him by HP, which alleged that he had inflated the worth of Autonomy.

In his written assertion for the UK case, Lynch mentioned the distinction between the UK and US courts: “An enchantment course of will likely be thought of later this yr. The English civil case included rumour proof from the US, and we have been by no means in a position to query or cross-examine these witnesses. That is in direct distinction to the rights of defendants within the US authorized system. When within the US legal trial we have been in a position to cross-examine the related witnesses, a really completely different story emerged. Why is the English authorized system so trusting?”

Concerning the $5bn write-down HP took after buying Autonomy, and HP’s try to spice up its market capitalisation, Lynch wrote: “Autonomy was lined as much as take a disproportionate hit.”