HTC has filed a complaint in its home country of Taiwan against a Citigroup employee after the broker downgraded its recommendation for the handset maker prior to a 59 percent drop in the company’s share price. Taipei-based Commercial Times reports that the suit alleges that the Citigroup employee disseminated false information that impacted the company’s share price.
Citigroup cut HTC’s stock from ‘buy’ to ‘sell’ on 7 July, attributing the change of recommendation to concerns about the company’s purchase of graphics technology company S3 Graphics, competition from Samsung and slowing demand.
Speaking to Bloomberg, deputy chief prosecutor at the Taipei District Prosecutors Office Huang Mou-hsin said the case was submitted in August against an individual in Citigroup Global Markets for alleged violations of the Securities and Exchange Act. The investigations are continuing, he added. A Citibank statement emailed to Bloomberg said as the matter was being examined by the authorities, it would be inappropriate to comment.
A report published by Citigroup Taipei-based analysts Kevin Chang and Jonathan Gu cut the broker’s 12 month price target for HTC by 37 percent on 6 July. They changed their recommendation to ‘hold’ in September before again rating it as ‘sell’ on 23 November, according to Bloomberg. The company’s share price has fallen by up to 59 percent since 6 July.
HTC became the biggest smartphone vendor in the US in the third quarter of 2011, according to Strategy Analytics, and is the world’s fifth largest smartphone maker by sales. However the company recently cut its sales forecast for the final quarter of the year by 20 percent due to increasing competition.
Adding to the company’s woes, the value of the acquisition of S3 Graphics was recently brought into question by the US International Trade Commission’s ruling that Apple does not violate any patents held by the company.