Bitrabo Editorial
The US Supreme Court has decided to examine a case involving Nvidia Corp.’s crypto mining revenue disclosure, a move that could have significant implications for shareholder disputes. Nvidia is seeking to dismiss an investor lawsuit alleging that the company was less than transparent about its reliance on crypto mining revenue before a market downturn in 2018.
The court’s decision could determine if the lawsuit lacks the necessary specifics. If Nvidia prevails, it may empower companies to more easily dismiss shareholder lawsuits early on, potentially avoiding protracted legal battles.
Nvidia CEO Faces Claims of Hiding Crypto Mining Earnings
Shareholders in the current case against Nvidia claim that CEO Jensen Huang concealed that the remarkable revenue growth in 2017 and 2018 stemmed primarily from crypto mining-related sales of the flagship GeForce GPU product, rather than gaming sales.
The investors argue that Nvidia’s exposure to crypto market volatility was greater than disclosed. In November 2018, Nvidia announced a revenue shortfall, leading to a more than 28% drop in its stock over two days, which Huang attributed to a “crypto hangover.”
The shareholders allege that analysts promptly recognized a purported “discrepancy” between Nvidia’s previous statements downplaying mining-related demand and the actual situation. They contend that internal communications involving Nvidia’s CEO would unveil the true extent of GPU sales to cryptocurrency miners, a claim that Nvidia refutes by stating that no such evidence has been presented.
Company Appeals to Supreme Court
The 9th US Circuit Court of Appeals in San Francisco ruled that the shareholders’ lawsuit could move forward, rejecting Nvidia’s plea for dismissal. Nvidia has appealed this decision, highlighting the lack of internal company documents to support the assertion that officials were aware of making “misleading statements.”
If the Supreme Court rules in favor of Nvidia, setting a higher threshold for shareholder lawsuits, companies may find it easier to secure early dismissals of such cases, saving them from the substantial costs associated with mounting robust defenses. This could reshape the landscape of shareholder litigation, influencing the level of accountability demanded from companies regarding their public disclosures.
As of now, the crypto market is valued at $2.3 trillion, down from its mid-March peak of $2.7 trillion. Despite expectations for significant catalysts to reignite the previous uptrend in major cryptocurrency prices, those catalysts have yet to materialize.
For example, Bitcoin (BTC) has been trading between $56,000 to $71,000 in the last two months and currently sits at $65,000 after an unsuccessful attempt to retest its all-time high of $73,700.
Image credit: DALL-E, chart data from TradingView.com