Nvidia Investigates Possible Stock Backdating

Nvidia announces a voluntary internal audit, and preliminary results indicate evidence of possible stock backdating.

Late last week graphics and gaming hardware manufacturer Nvidia announced that a voluntary internal review of the company’s stock option practices is underway. The review, conducted with the assistance of outside counsel, is examining practices dating back to the company’s initial public offering in 1999. Nvidia reported that the review’s preliminary findings indicate that “incorrect measurement dates were used for financial accounting purposes for stock option grants in certain prior periods.”

Stock backdating, which is the process of manipulating grant dates to increase the value of stock options, has in recent months been the subject of growing concern within the technology industry. Gaming companies Take Two, THQ, and Activision all recently confirmed that they are being investigated by the U.S. Securities and Exchange Commission for possible stock backdating, and Electronic Arts is currently the subject of a lawsuit involving the practice. Last month, the SEC reported that more than 80 companies are currently subject to a federal probe regarding stock backdating.

At present there has been no indication that Nvidia is under federal investigation, although the company says they have notified the SEC of their internal review. The review will delay the full public reporting of Nvidia’s financial earnings for the second quarter of fiscal year 2007.

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