Shareholders file suit against Oracle over deceptive claims…

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Oracle is facing a class action lawsuit from a group of disgruntled bondholders who claim they lost money after the company misled them over how much money it needed to borrow to finance its AI infrastructure commitments. Specifically, they say the company's claim that it "may" need to borrow more money was false and misleading, because it was already planning to issue another set of bonds. According to Reuters, Oracle sold $18 billion of notes and bonds on September 25, 2025, to support its $300 billion deal with OpenAI. However, investors were surprised when the company released another set of bonds worth $38 billion almost two months later.

“The bond market’s reaction to Oracle’s additional debt was swift and bracing,” the suit reads. The market saw Oracle’s additional debt as an increased credit risk that the company is taking on. Because of this, the original series of bonds and notes have fallen in value and is now trading like debt from companies with lower ratings. The bondholders, led by the Ohio Carpenters’ Pension Plan, contend that the statements for the initial bonds said that the company was only considering another set of loans. However, they argue that Oracle already knew at this point that it was going to issue another, much larger, loan to fund its expansion. The plaintiffs said that Oracle and some of its chief executives, as well as the 16 banks that were underwriting the loan, were liable under the Securities Act of 1933.

As experts repeatedly warn about AI bubble fears, Oracle has been borrowing aggressively to fund its AI dreams. When the company launched its initial bond drive for $18 billion in September, the demand was so high that it was four times oversubscribed. But just three months later, investors are now reportedly sitting on $1.3 billion in paper losses. And even though S&P and Moody’s still rate Oracle as investment grade, its BBB or Baa2 rating places it just a couple of notches above junk rating. More than that, these rating agencies have put it on the negative watch, meaning there’s a chance that they will downgrade the company’s rating, depending on the risk that it’s taking on.

The massive AI buildout requires billions, if not trillions, of dollars in investment. This is likely not a problem for tech giants like Microsoft, Meta, and Amazon, who have massive war chests and can likely afford to keep pouring money into the infrastructure without breaking a sweat. However, other smaller companies will probably require additional funding — either through bonds and notes, private equity, selling shares, or a mixture of these. More than that, there’s also the intricate web of investments, projects, sales, and loans that multiple AI companies have built, so a failure of just one of the companies involved in it could mean a complete collapse for the entire system.

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7 Comments Comment from the forums

bit_user

A canary in the coal mine?
Reply
TerryLaze

When the company launched its initial bond drive for $18 billion in September, the demand was so high that it was four times oversubscribed.
What am I missing here?!?
People wanted 4 times the amount of papers oracle first put out and so they put out a second batch of 2 times as many, so well within the amount that was oversubscribed, people man, can't live with them.

Bit_user said:
A canary in the coal mine?
For how the stock/bond market is the wild west of gambling?!
Don't people already know that?
Reply
bit_user

TerryLaze said:
What am I missing here?!?
People wanted 4 times the amount of papers oracle first put out and so they put out a second batch of 2 times as many, so well within the amount that was oversubscribed,
The original purchasers claim that demand wouldn't have been nearly so high, if Oracle had been up front about how much debt they planned to issue.

Don't talk about issuing bonds as if it's a product. That's the wrong way to think about it. They represent debt. The more debt a company takes on, the less valuable its existing bonds are, because a company with more debt is more likely to default. That's why the bondholders from the first round are now underwater.

TerryLaze said:
For how the stock/bond market is the wild west of gambling?!
Don't people already know that?
Well, bonds are meant to be safer than stocks.

However, my point wasn't about risk, but rather that it's a potentially troubling sign that Oracle needed to issue more debt than they might've originally planned. Perhaps the AI bubble is weakening.
Reply
TerryLaze

bit_user said:
The original purchasers claim that demand wouldn't have been nearly so high, if Oracle had been up front about how much debt they planned to issue.
From how I read it they just complain about oracles rating going down and them losing money.
They say that oracle said 'may need' even though they think oracle was sure to need more but if oracle said may then that should already be a concern while buying, you already know there is the possibility, you are already informed.
(Also if you are buying bonds and think that 18bil is going to get any company anywhere in the AI business then what are you even doing.
Anybody can look up oracles financial results and would know how much they have vs how much they would possibly need)

bit_user said:
However, my point wasn't about risk, but rather that it's a potentially troubling sign that Oracle needed to issue more debt than they might've originally planned. Perhaps the AI bubble is weakening.
No spending more money is "inflating the bubble" more.
If they succeed or face plant can only be known in the end.
Reply
bit_user

TerryLaze said:
From how I read it they just complain about oracles rating going down and them losing money.
Because they issued more debt.

TerryLaze said:
No spending more money is "inflating the bubble" more.
Taking on enough debt that some have demoted their credit rating is one step above "junk" is clearly a sign that they cannot continue their deficit spending. So, it sounds to me like Oracle's spending is about to dry up.
Reply
TerryLaze

bit_user said:
Because they issued more debt.
Which is something that they knew would happen but now are trying to weasel out of by claiming unclear text.

Bit_user said:
Taking on enough debt that some have demoted their credit rating is one step above "junk" is clearly a sign that they cannot continue their deficit spending. So, it sounds to me like Oracle's spending is about to dry up.
They also can't stop spending, at least depending on how the contract with openAI is, usually there are penalties that are higher than the money saved, so they have to spend as much as they planned to spend no matter what happens to their rating.
Reply
bit_user

TerryLaze said:
Which is something that they knew would happen but now are trying to weasel out of by claiming unclear text.
If they knew it would happen, then they wouldn't have bought the bonds, because it had the obvious effect of the bonds getting devalued to less than they sold for.

If it were just normal market dynamics, then they wouldn't be filing a lawsuit, either. That would be a waste of even more money. They will have the benefit of the discovery process and their day in court, in order to prove their case. It doesn't matter what you say or think.

TerryLaze said:
They also can't stop spending, at least depending on how the contract with openAI is, usually there are penalties that are higher than the money saved,
No, a big contract always has exit clauses and they're never so big as to make it a suicide pact. A company like Oracle would never enter into a contract that it literally couldn't afford to get out of.
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