Nvidia paid about $20 billion for Groq's technology and almost everyone who built it, and did not buy Groq. That structure is now in front of a Delaware judge. On October 2, two former Groq engineers who still hold shares, Benjamin Serebrin and Joshua Rubin, sued the company's board in the Court of Chancery, alleging it handed over the business without the stockholder vote the law requires. Nvidia is not a defendant. Groq says the suit is without merit and will defend it.
The arithmetic of the deal is where the argument lives. When Groq announced it on Christmas Eve last year, it called the arrangement a non-exclusive licence. About $17 billion went to the company as a licensing payment, shared among its backers. A separate pool of roughly $3 billion in Nvidia restricted stock was set aside for engineers who moved across, among them Groq's founder and board member, Jonathan Ross. The company's president went too. The complaint says Nvidia ended up employing nearly all of Groq's engineers — somewhere around 150 to 200 people. Groq still has the technology. What it does not have is anyone to build it with.
Those two numbers travel to different people through different pipes, which is the part worth slowing down on. A licence fee is paid to the company, where it drops into the capital structure and runs down the preference stack: investors first, in the order their contracts specify. Restricted stock awarded by the acquirer goes directly to named individuals and never touches the company at all. So the choice of how to label $3 billion is also a choice about who receives it, and the plaintiffs allege the people making that choice sat on both sides of it. A board majority, the complaint says, was conflicted.
None of which has been tested, and the words non-exclusive are doing real work rather than decorative work. Groq kept the right to use what it built, which is a genuine distinction from selling it, and Nvidia was an investor in the company before any of this rather than an outsider arriving with a cheque. The case the engineers are making is not that shareholders were impoverished — $20 billion arriving at a chip startup is not a tragedy. It is narrower and stranger than that: they say nobody asked them, and that a transaction of this shape should have required a vote on what the whole thing was worth.
The Justice Department has been circling the same structure from the other direction. It opened a probe in September into whether arrangements like this avoid antitrust review, since a licence plus a hiring spree is not a merger and does not get filed as one.
A sale of a company's essential assets requires a stockholder vote. A merger requires an antitrust review. What happened last Christmas Eve was called neither, and two different sets of lawyers are now asking whether it should have been.
Groq still has the technology. What it does not have is anyone to build it with.
