NVIDA shareholder, Lisa Miller, has filed suit against the company as well as president and CEO, Jen-Hsun Huang, and CFO Marvin Burkett for violations of US securities laws, alleging that they deliberately covered up details of the GPU defect for several months, causing investors to loose money when the issue was finally owned up to. Miller is seeking class action status for the suit on behalf of all NV common stock holders between November 8, 2007 and July 2, 2008.
According to the filed suit, NV probably knew about the hardware defect by August 2007 based on comments made by Michael Hura, VP of investor relations, earlier this month when he admitted the company had been working on the problem with hardware vendors for well over a year. Additionally NV almost certainly knew about the issue by November 2007 when HP started to issue BIOS updates to "fix" the problem.
The crux of the complaint is that, despite knowing it had a hardware issue that was going to affect a number of is products, NV still issued two quarterly and one annual financial report claiming record breaking performance. The suit says that these filings were false and misleading because they failed to disclose details of the known issue, and as a result caused investors to overvalue the company's stock
When NV finally came clean about the problem in July, the company's share price fell 31% from $18.78 USD to $12.98 overnight, effectively wiping $3 billion off the company's market cap in less than a day. Ouch!
Because of the losses Miller wants compensation, including interest, and court costs.
It's not at all surprising that someone has stepped forward to file this suit, and for the majority of us (those who don't own NV shares) we won't see any benefit even if the case in won. On the other hand, these types of trials can become drawn out and very messy, which will put a shadow over the company. It is likely we'll see NV turn conservative over the next year or two, so no more "can of whoop-ass" comments for a while.
Also if/when the case moves forward, we can expect the lawyers to start issuing subpoenas to dig up evidence. This means lots of internal emails and documents will be made public for us to pore over, which could uncover lots of juicy gossip. Watch this space.
For those that way inclined the case filing can be found here (pdf). Warning legalese!
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