Two former Groq engineers have sued Nvidia in Delaware's Court of Chancery, alleging the chipmaker's $20 billion deal for Groq's technology shortchanged Groq's stockholders. The suit claims Groq's board approved the transaction without the stockholder vote Delaware law requires. Groq has called the lawsuit meritless.
Former Groq engineers Joshua Rubin and Benjamin Serebrin filed suit against Nvidia, alleging the $20 billion deal to acquire assets from Groq left stockholders squeezed out of value. Both men left Groq before the deal was announced but still held stock in the company, according to their complaint.
Rubin and Serebrin allege the deal offered stockholders a low price, in documents filed on Oct. 2 at the Court of Chancery of the State of Delaware. Their case claims Groq's board sold the company to Nvidia without the stockholder vote Delaware law requires, and without any process designed to test or maximize the value of what Nvidia bought.
How the deal was structured
The case alleges Nvidia allocated $17 billion to a license it labeled non-exclusive and set aside an additional $3 billion of Nvidia restricted stock units for the Groq employees who moved with the technology. It also alleges the arrangement positioned the investment funds that designated Groq board members to enjoy windfall returns from the later squeeze-out.
The suit claims a board majority was conflicted as a result, costing Groq's stockholders billions of dollars. Approximately 150 to 200 Groq engineers became Nvidia employees as part of the deal, according to the case.
In December, Groq announced a licensing agreement with Nvidia for its inference technology. Groq founder and CEO Jonathan Ross and president Sunny Madra joined Nvidia as part of the deal, along with other senior leaders, while Groq said it would continue operating independently.
Groq pushes back
According to CNBC: "This lawsuit is meritless and we will vigorously defend ourselves against it." A Groq spokesperson said the licensing agreement delivered exceptional value for Groq, its investors and its employees, adding the company remains focused on serving customers and building its AI inference cloud.
Nvidia CEO Jensen Huang had written to employees that the agreement would expand Nvidia's capabilities around the time the deal was announced, saying Nvidia planned to integrate Groq's low-latency processors into its AI factory architecture. Huang added that Nvidia was licensing Groq's intellectual property and adding employees, but was not acquiring Groq as a company. Nvidia has been approached for comment on the lawsuit.
Source: CNBC
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