Nvidia CEO Jensen Huang’s massive stock selloff has drawn attention as he offloads about $14 million in shares nearly every day, as per reports.
His move has raised questions among investors, who wonder why he chose to sell rather than hold, especially after Nvidia’s stock price surged, reported Fortune.
Five years ago, Huang’s net worth was $3.73 billion. He now has over $92 billion, though it’s dropped from a peak of $119 billion earlier this summer, as per the report.
10b5-1 plan
Huang’s recent share sale is under a 10b5-1 plan, reported Fortune. 10b5-1 plan is a pre-programmed trading agreement meant to avoid insider trading.
While he followed the legal procedures, investors thought something might be going on within the company as he chose to sell after a period of high share performance and then a dip, as per the report.
Uncertainty about the company’s future
According to corporate governance expert Nell Minow, his actions don’t look good, reported Fortune. “It signals that the stock has jumped tremendously and they’re getting a little nervous about it,” quoted Fortune. “It’s certainly concerning for investors; we ask ourselves: ‘Well, maybe I should be selling mine, too. What are they telling me? If they don’t have the confidence in the stock, then why should I?’”
Huang’s selloff is not new. Last year, he sold $117 million worth of stock, but this year’s $323 million sale in July has turned heads. Analysts are particularly concerned that Huang’s continued selling after such a high stock performance sends mixed signals to shareholders.
Another view
James Reda, managing director at Chicago-based consultancy Gallagher’s HR, is of another view. Reda argued that selling in small chunks would simply reduce market disturbance and thus stock prices wouldn’t be harmed by his moves, reported Fortune. Huang’s stock sales follow a public 10b5-1 plan and ensure the market isn’t blindsided by the influx of shares.
Too much stock
In Nvidia’s 2024 filing, it’s revealed that CEO Jensen Huang was paid a salary of $996,514, plus stock awards valued at $26 million and another $4 million in performance-based incentives, reported Fortune. Therefore, Huang’s total compensation is approximately $34.17 million. Before he began selling shares this spring, Huang owned more than 93 million Nvidia shares, which is equivalent to 3.79% of the company.
This is a sign that Huang has been given too much stock, as per Minow. “Huang’s shares should be locked in ‘golden handcuffs’—meaning he can’t sell until years after he leaves the business,” quoted Fortune.
Minow said it’s time for Nvidia to stop awarding Huang more stock as he already holds a significant amount. She said “that’s why he’s getting rid of it,” quoted Fortune.
Transparency needed
There is scope for improvement on Nvidia’s board, according to Minow. She noted that out of the 12 members, only one has expertise in corporate governance. The company should be more transparent about its plans for a CEO successor, given that leaders can’t lead forever, reported Fortune.
Even other experts want more transparency from the company. Aalap Shah, managing director at Pearl Meyer, stressed the need for more transparency in succession planning across the market. According to Shah, clear succession planning is crucial for any incoming CEO and is essential for strong corporate governance, reported Fortune. Without it, companies risk making hasty decisions that can create volatility for investors.
FAQs
Why is Jensen Huang selling so many Nvidia shares?
Huang is selling shares through a planned schedule to avoid insider trading. However, the frequency of his sales after a stock surge has left some investors wondering if he’s losing confidence in the company’s future.
How does Nvidia’s governance impact investors?
Experts are urging Nvidia to be more transparent, especially about its succession plan. Clear planning for the future helps avoid uncertainty and gives investors more confidence in the company’s long-term stability.
