Fortescue shares in focus as more ‘spying’ details emerge

Fortescue Ltd (ASX: FMG) shares are under the spotlight today as further details of its alleged spying on former executives emerge.

This follows revelations that the company hired private investigators to monitor former executives involved in a legal battle over the alleged theft of its green iron technology.

Fortescue shares are currently trading 1.41% higher at $21.90 apiece but are down more than 7% in the past month.

Court hears further details in spying allegations

The matter surfaced in late June when Fortescue alleged that two former executives had taken intellectual property (IP) with them when they left toward the end of 2021.

Fortescue alleges the former executives – a chief scientist and senior executive – used this IP to form their own company, Element Zero, in the race to develop carbon-free iron.

This led to the issuance of search orders and raids on the homes and offices of Element Zero staff in May.

It then emerged in July that Fortescue had hired private investigators to gather information on the former employees and their families.

The matter was back before the court on Wednesday. The Federal Court heard again that Fortescue’s private investigators engaged in extensive surveillance.

According to The Australian., this reportedly included following family members on shopping trips, sifting through their mail, and taking photographs of their homes.

The report included photos of the pair’s wives and children, the court heard, whilst the private investigators also uncovered Element Zero’s secondary address in Western Australia.

How did management respond?

In response to the revelations, Fortescue executive chairman Andrew Forrest told the court he was “surprised to learn of the investigations.” He said:

I was surprised to learn of the investigations and have been advised by Fortescue’s legal team that they were necessary in order to be granted search orders from the Federal Court.

Fortescue’s external legal team have been reminded that they also have an obligation to comply with the company’s values and their engagement is now under review

Forrest acknowledged that the company’s legal team had overstepped and promised a review of their engagement.

“Fortescue’s external legal team have been reminded that they also have an obligation to comply with the company’s values, and their engagement is now under review,” he added.

Fortescue share price fall

Since the controversy, Fortescue shares have pushed lower, dropping from highs of $27.30 per share on 22 May. They are down 25% this year to date.

But then again, the price of iron ore has dropped, too. It has fallen from US$117/tonne on 31 May to US$110/tonne at the time of writing.

Fortescue is a price taker on iron ore, meaning its share price is highly sensitive to fluctuations in its market price. So, the market could equally be focusing on the price of iron ore.

Foolish takeaway

Fortescue is in the spotlight today for more than just its share price. After yesterday’s court hearing, the allegations of corporate espionage and the ensuing legal battle continue to linger.

As the situation unfolds, investors may need to weigh the potential impacts of these revelations against the company. The matter will return before the courts in August.

The post Fortescue shares in focus as more ‘spying’ details emerge appeared first on The Motley Fool Australia.

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Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.