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Siemens Energy
stock tumbled on Friday, afterward
General Electric
sued the German company for alleged theft of trade secrets it claims were used to win contracts worth billions of dollars.
Shares in the company, a spin-off from
Siemens
listed last September were 6.3% lower in early trading. Despite the decline, the stock is still up 44% since listing.
The lawsuit, which was filed Thursday in a U.S. district court in Virginia, alleges that Siemens Energy obtained the U.S. giant’s trade secrets when both companies competed for a gas turbine contract for a Virginia-based energy company.
Dominion Energy
in May 2019. It alleges that a senior Dominion employee shared details of GE’s contract offer with a Siemens employee, who then forwarded the trade secrets to “dozens” of colleagues, including those responsible for Siemens’ own offer.
Read:GE Stock won’t be going anywhere in 2021. This is why JP Morgan is still panicking it.
Those secrets were then used to improve Siemens’ own bid and ultimately win the contract worth between $ 225 million and $ 340 million, the lawsuit said. In addition to this injustice, Siemens then waited 16 months before disclosing to GE that it owned GE’s trade secrets in September 2020 in a ‘nothing to see, people’ letter, in which Siemens misrepresented the scope and impact of its illegal plan. and minimized, ”According to the filing.
The lawsuit alleges that between May 2019, when the proposed spin-off was announced through to its completion in September 2020, Siemens Energy was “ highly motivated ” to secure as many energy contracts as possible to improve its financial outlook and expected stock price. before its IPO.
It alleges that the trade secrets are relevant to at least eight other gas turbine contracts “unfairly won” by Siemens Energy from General Electric in the 16-month period before the German company notified GE. It added that the secrets were still pertinent to an ongoing contract award in South Carolina, which the two companies are vying for, adding that the company has “steadfastly refused” to assure GE the secrets have been destroyed. .
Overall, the theft would have allowed Siemens to bring in “billions of dollars” in contracts at the expense of GE’s ability to compete fairly.
Citi analysts said the lawsuit was negative for sentiment about Siemens Energy, which was recently among the top-performing companies in the industry, while noting that it can take a long time to complete a lawsuit.
“In terms of stock price sensitivities, a $ 1 billion fine – possibly at the top end of possible scenarios – would amount to about € 1.1 / share, or a 3% hit from the closing price on January 14th” , they said. “This should be seen in the context of the> 50% increase in the share price of Siemens Energy in the past three months,” she added.
Siemens Energy said the lawsuit had not yet been officially served, but had learned of it through media reports.
A spokesman said Barron’s the company identified the use of the trade secrets “through its own robust compliance processes,” before conducting an internal investigation and disclosing the findings to both Dominion and GE.
Read:Siemens turns off its drive unit. What that means for GE Stock.
The company said it had implemented “comprehensive remedial action” in response, punishing affected employees – including separation from the company – by removing “confidential competitor information” from all of its systems and providing additional compliance training to all. employees in the US.
“The integrity of Siemens Energy is the foundation of our operating principles and will not be compromised under any circumstances,” added the spokesperson.
A GE spokesperson said, “At GE, we aggressively protect and defend our intellectual property. Since this lawsuit is ongoing, we have no further comments at this time. ”
Dominion Energy declined to comment.