Apple, Nvidia face the wrath of the SEC after bad options news

Posted by Scott M. Fulton, III

New York (NY) - Suddenly, Apple finds itself in a position of needing some really fast computers. This morning, MarketWatch reports the company has received a warning letter from the NASDAQ exchange advising the company it faces possible delisting from its list of traded stock issues, if it delays its filing of a quarterly report much further. Since an SEC investigation began in June, Apple has implemented an internal investigation, leading to the revelation ten days ago that it may have failed to report backdated options since 2001.

Last week, Nvidia joined the list of technology companies - which apparently now includes Juniper Networks - admitting they may have to restate their earnings back several years on account of possible options backdating. In Nvidia's case, it may actually have to restate earnings back to 1999. A backdated option has an exercise date set intentionally at a time when its company's stock value is lower than at present, in order that their value may be the difference between present and past value, instead of zero. Backdating isn't presently illegal, though mis-stating earnings is, and if a company fails to charge those backdated options values against earnings, it could face fines by the Securities and Exchange Commission.

Perhaps worse, though, could be the wrath of shareholders whose anger may stem from their stock portfolios having had artificially inflated values. This morning, however, they're getting a breather on account of positive news: a ceasefire taking effect in the Middle East, which has triggered a drop in crude oil prices and oil futures prices. Both Nvidia and Apple's stock values ticked up after the Monday morning bell. Last week, Nvidia scored a small victory, securing the default configuration option spot for Apple's new line of Mac Pro desktop units. ATI was the pre-installed option for iMacs and had an upgrade option for Mac minis, although an ATI Radeon card is featured as one upgrade alternative for Mac Pro customers.