Nvidia Executives Allegedly Sold Shares During Crypto Boom

AlphaAtlas

AlphaAtlas

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We already reported that Nvidia is facing a class action lawsuit for allegedly violating federal securities law. As a reminder, Nvidia stock was sitting at about 155 dollars a share in August 2017, which is the beginning of the "class period" in this particular suit. It shot up to over $281 dollars a share in September this year, then quickly dropped to around $144 by November. Most companies in the tech sector didn't do particularly well during that period, but Nvidia rose, and fell, harder than almost anyone else. While the focus of the class action lawsuit is on the crytpocurrency market in relation to Nvidia's forecasts, iamjanco spotted an interesting claim in one of the court documents. The attorneys say Nvidia executives, including Jensen Huang, sold millions of dollars in stock as the price was shooting up. Assuming those claims hold any weight, trading on insider knowledge illegal, and similar accusations were made against Intel's former CEO about a year ago.

These representations had their intended effect, as analysts upgraded the Company’s stock and NVIDIA shares traded at record highs. At the same time, NVIDIA senior executives began selling significant amounts of their personally held shares. For example, CEO Huang sold 110,000 of his personally-held NVIDIA shares during the Class Period, reaping over $18 million in proceeds.
 
I'm no law / stock expert, but I don't see how this could be considered insider trading or "bad". The stock was over the $200 mark from Dec 2017 until Nov 2018, and executives typically have to submit formal documentation months in advance and get approval before being allowed to sell.

Stock was up a lot, makes sense that they would sell.
 
IdiotInCharge said:
Isn't this when you're supposed to sell? When the stock is up?
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Yeah, but not if you know the stock is about to go down via insider information. That's very illegal.


But like others said, it could be a bunch of smoke from the lawsuit lawyers. We don't know how far ahead the executives planned the trades, among other things.
 
It really makes a big difference as to the exact timing of the sales. For example Huang is going to know that they are expected to miss quarterly estimates before anyone else does. So sell before it falls.
 
IdiotInCharge said:
Isn't this when you're supposed to sell? When the stock is up?
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I would, and I like the idea of Crypto, I just knew something like that would never go anywhere without government getting involved and shutting it down at some point, had I owned stock I would have sold lots as well, big time when a stock goes multiple of what it was before, not sure why anyone would think that was sustainable.
 
zrikz said:
I'm no law / stock expert, but I don't see how this could be considered insider trading or "bad". The stock was over the $200 mark from Dec 2017 until Nov 2018, and executives typically have to submit formal documentation months in advance and get approval before being allowed to sell.

Stock was up a lot, makes sense that they would sell.
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It will depend on what he knew before he sold and they will subpoena his emails to see. If they knew sales were artificially inflated due to crypto and they would experience a decline and then sold before issuing new guidance to the public then they may have a case.
 
AlphaAtlas said:
Yeah, but not if you know the stock is about to go down via insider information.


But like others said, it could be a bunch of smoke from the lawsuit lawyers. We don't know how far ahead the executives planned the trades.
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Good point. I'm too lazy to read through the document, but unless they submitted the sell request in like Q3 when they started seeing a downtrend in sales and figured they would bomb, shouldn't be an issue. Timing is the big question.
 
zrikz said:
Good point. I'm too lazy to read through the document, but unless they submitted the sell request in like Q3 when they started seeing a downtrend in sales and figured they would bomb, shouldn't be an issue. Timing is the big question.
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The part quoted in the article is the only mention of insider trading I found. They copied/pasted that same paragraph in 2 different places.
 
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As long as everything was reported correctly I don't see the lawsuit getting very far. Don't play at the casino (stockmarket) if you aren't prepared to lose.
 
Meanwhile congress can use insider trading and sell whenever they want, seem fair to you?
 
Of course they knew... Insider trading and information happens every day.
 
Well there are some other things to consider as well. The pricing of inventory did not change after the crypto crash, if they knew that it was bad earlier and did not change guidance while selling stock then they are in for even more trouble. That info could also be used as a defense, ex we had no idea that this was happening we did not even change inventory pricing to match the change in demand.
 
Don't they have to report sales like a few months in advance to the sec?
 
Executives get stock options as part of their compensation package. They buy and sell shares regularly. I recently saw a YouTube video of a guy claiming EA, Activision and other gaming execs are dumping stock because of recent game performance. But he neglected to look at previous data showing regular exercise of options, consideration for end of year profit taking and taxes.

Stock was up on crypto, impending announcement of new tech (RTX, driverless cars etc.), Christmas shopping season. Then it was down on crypto crash/ASIC takeover of mining, GPP, RTX launch dead on arrival, and various other missteps of NVIDIA.
 
Retronym said:
we can't have people making money. come on now.
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No one says that someone can't work hard and make money. However, there are laws and rules that insiders in publicly traded companies have to abide by to ensure a fair and equitable marketplace. If you are OK with someone like the CEO of a company ignoring those rules for their own personal gain while the other stockholders of the company take significant losses, then you are against free-market economies.

Edited for kindness. :)
 
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Crackinjahcs said:
Executives get stock options as part of their compensation package. They buy and sell shares regularly. I recently saw a YouTube video of a guy claiming EA, Activision and other gaming execs are dumping stock because of recent game performance. But he neglected to look at previous data showing regular exercise of options, consideration for end of year profit taking and taxes.

Stock was up on crypto, impending announcement of new tech (RTX, driverless cars etc.), Christmas shopping season. Then it was down on crypto crash/ASIC takeover of mining, GPP, RTX launch dead on arrival, and various other missteps of NVIDIA.
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GPP affected stock price? RTX launch was DOA? Those had little to nothing to do with their share price decline. It was crypto crypto crypto. You think stock analysts were reading Hardocp and downgrading NVDA? Hehe.
 
TAP said:
GPP affected stock price? RTX launch was DOA? Those had little to nothing to do with their share price decline. It was crypto crypto crypto. You think stock analysts were reading Hardocp and downgrading NVDA? Hehe.
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No, just general trend and attitude towards the company. In the end I know business practices are trumped by the dollar and estimated corporate earnings.

edit: and I was a bit strong with the DOA comment. I may have had too much coffee this morning. I was just giving in to the hype of the Nvidia pricing levels, coverage of card failures, Microsoft delay of the patch to enable RTX features, only BFV having working RTX for a while. But I wouldn't turn one down if it showed up on my doorstep.
 
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AlphaAtlas said:
Yeah, but not if you know the stock is about to go down via insider information. That's very illegal.


But like others said, it could be a bunch of smoke from the lawsuit lawyers. We don't know how far ahead the executives planned the trades, among other things.
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But that assumes they KNEW the stock was going to drop. Nvidia was being favoured by the street for a variety of reasons. Crypto was one of them, but driverless cars, AI, and data centres were huge drivers of Nvidia’s rise. Most talking heads on financial TV I saw lead with these points and added crypto later. To me, it would be difficult to prove that Nvidia knew the stock would get cut in half because of crypto, factoring in the above and combining it with the fact that no one knew exactly where crypto was going to go. John McAfee called a $1 million price target on Bitcoin and would “eat his penis on camera” if it didn’t hit that. Tons of retail investors were pouring in to crypto “assets” at an absurd pace, driving an asset bubble that would have been impossible to give clear guidance on. Heck, there are still financial people claiming crypto is about to explode again, like perpetual Bitcoin Bull Tom Lee.

This feels more like trial lawyer ambulance chasing to me than anything else.
 
HockeyJon said:
But that assumes they KNEW the stock was going to drop. Nvidia was being favoured by the street for a variety of reasons. Crypto was one of them, but driverless cars, AI, and data centres were huge drivers of Nvidia’s rise. Most talking heads on financial TV I saw lead with these points and added crypto later. To me, it would be difficult to prove that Nvidia knew the stock would get cut in half because of crypto, factoring in the above and combining it with the fact that no one knew exactly where crypto was going to go. John McAfee called a $1 million price target on Bitcoin and would “eat his penis on camera” if it didn’t hit that. Tons of retail investors were pouring in to crypto “assets” at an absurd pace, driving an asset bubble that would have been impossible to give clear guidance on. Heck, there are still financial people claiming crypto is about to explode again, like perpetual Bitcoin Bull Tom Lee.

This feels more like trial lawyer ambulance chasing to me than anything else.
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John McAfee came across to me as shady even before crypto.
 
kirbyrj said:
It really makes a big difference as to the exact timing of the sales. For example Huang is going to know that they are expected to miss quarterly estimates before anyone else does. So sell before it falls.
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Yes, but CEOs have to declare an intention to sell 30 days in advance I believe according to SEC rules. If he did this, and there is nothing showing he could foresee a disasterous quarter, and there is nothing showing he was dumping insane amounts of stock while pumping it under false pretences to grease the sale, then this doesn’t necessarily indicate something illegal was going on. Anyone who was the CEO of a company who’s shares increased 10 fold in a few short years would more than likely take some off the table, particularly of public knowledge is showing a high P/E ratio suggesting people were projecting huge growth regardless of what could be reasonably delivered, and that’s not necessarily illegal.

Also, bear in mind that the company’s guidance and the street’s are not the same thing. Jensen could have reported numbers in line with his projection, but the stock could crater if it misses the high man on the street. This happens with Apple literally all the time.

I’m not saying that’s necessarily the case here, I don’t know the full details so I can’t really comment, I’m just saying that there are a lot of variables that need to be proven to demonstrate impropriety.
 
INVIDIA:

Her face was sickly pale, her whole body lean and wasted, and she squinted horribly; her teeth were discoloured and decayed, her poisonous breast of a greenish hue, and her tongue dripped venom. … Gnawing at others, and being gnawed, she was herself her own torment. „ ~ Ovid (about Invidia) in Metamorphoses

She’s pitied by Roman deities, seen as a hideous and spiteful being. Seeking to poison all creation with the taint of hate, punishing those revelling in their own self-admiration and taking away wealth and fortune from those deemed undeserving. She’s often portrayed in the color green, which is closely associated with envy. In magic folklore envy or the “evil eye” is the principal vice that motivates demons. It’s also what drives the “biting eye” of witches who would cast their spells with poisonous tongues. It was a deeply held belief by the ancient Greek & Romans that envy originates from the eyes.


just NVIDIA being true to what their name means ...

Image1.png
 
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Any documentation on what percent of holdings these folks sold? Selling say 20% when the stock is near high points is just prudent profit taking. If they sold every share they owned, the suspicion level rises just a bit.
 
HockeyJon said:
John McAfee called a $1 million price target on Bitcoin and would “eat his penis on camera” if it didn’t hit that.
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Wait... really? How did I miss this? That guy keeps getting crazier.
 
If he sold during his assigned window then it's no issue...also for most people in the industry it was obvious the crypto craze was a fad that would have to go away eventually, so you might as well cash in while the stock is up as it would be expected to fall when the market dries up. So he should have sold when he was allowed to sell.
 
Just want to ensure that it's understood that I never said Huang and the others at his company that are party to the suit would be charged with insider trading, only that the possibility exists. I made that clear in my submission to [H]:

"item no. 4 below may be a bombshell and potentially could end up be interpreted by the SEC as insider trading if the plaintiffs get their way; mind you, I'm not saying that will happen"

The details of the complaint are publicly available and can be accessed via Standford Law School's Securities Class Action Clearinghouse.
 
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