I have some stock in a company I used to work for so am subscribed to the investor's update letters. In the most recent investor's update the CEO announced some very impressive statistics for the latest product, and in clear terms stated that these results had been achieved now.
I contacted an existing employee congratulating them on these impressive results (and to subtly confirm these results as I was suspicious). This employee corrected me, stating that this work is still in the design phase, and the results I was congratulating them on were an aspiration only.
I believe that what the CEO is doing constitutes fraud, especially since the company is going into a new investment round and hoping to raise more capital from the existing investors.
The other investors in the company are not familiar with the details of the work being done, and it's easy to see how they've had the wool pulled over their eyes here.
Being invested in the company I certainly have a conflict of interest here. However I do not believe what the CEO is doing is beneficial for the company in the long run, indeed this over-promising behavior has lead to tight spots for the company in the past.
This behavior is not altogether surprising: when I was an employee of the company, there was always some bending of the truth when doing pitches and meetings with clients. Indeed, one of reasons I resigned was because of being asked to fake a product demonstration in front of some clients; The CEO wasn't willing to put this in writing at the time, however I have records of contacting several other people for advice regarding this at the time.
I have several options available to me now:
- Confront the CEO directly about this and ask for an explanation.
- Raise this with the company board (which comprises the CEO and some other investors).
- Contact all of the investors (who are all being propositioned for the upcoming investment round).
- Raise this issue at the upcoming investors meeting.
What are the likely consequences of each of these options?