Following the loss of the data center company’s second auditor in less than two years, Super Micro investors continued to rush out on Friday, sending the stock down an additional 11% and extending this week’s sell-off to 45%.
All 2024 gains were erased as the company’s shares finished at $26.05. By March, when the stock reached its peak of $118.81, it had more than quadrupled in value for the year. Wall Street was embracing the company’s expansion, which was fueled by sales of servers loaded with Nvidia’s AI chips when the S&P Dow Jones included the stock in the S&P 500 earlier that month.
Since March, Super Micro has experienced a dramatic collapse that has destroyed around $55 billion in market capitalization and put the business in danger of being delisted from the Nasdaq. Super Micro said Wednesday that it will give a “business update” about its most recent quarter on Tuesday, which is Election Day in the United States, as the stock was in the middle of its second-worst day ever.
Super Micro’s announcement in August that it would not submit its annual report to the SEC on time was the catalyst for the company’s subsequent difficulties. After revealing a short position in the company, renowned short-seller Hindenburg Research reported that it had found “new evidence of accounting manipulation.” Later, according to the Wall Street Journal, the Department of Justice was only beginning its investigation into the business.
Just 17 months after replacing Deloitte & Touche as its accounting firm, Super Micro announced on Wednesday that Ernst & Young had left the company. It was “unwilling to be associated with the financial statements prepared by management,” according to the auditor.
Super Micro “disagrees with E&Y’s decision to resign, and we are working diligently to select new auditors,” a spokeswoman for the business told CNBC. According to the representative, Super Micro does not anticipate that Ernst & Young’s concerns will “lead to any restatements of its quarterly financial results for the fiscal year ended June 30, 2024, or for prior fiscal years.”
Citing the Hindenburg note, the Justice Department inquiry, and the departure of Super Micro’s accounting firm, which the analysts referred to as a “serious matter,” Argus Research analysts downgraded the company to a hold in the intermediate term on Thursday. Beyond accounting anomalies, Argus is concerned that the corporation might be conducting business with troublesome entities.
According to the researchers, “related-party transactions and SMCI products ending up in the hands of sanctioned Russian companies may be the main concerns of the DoJ.”
Super Micro stated in September, the month after the announcement of its file delay, that it had been notified by the Nasdaq that the firm was not in accordance with the exchange’s listing regulations because of its late status. According to Super Micro, the Nasdaq’s regulations gave the business sixty days to present a strategy to recover compliance or file its report. The deadline would be around the middle of November based on that schedule.
Super Micro stated in an August results presentation that revenue more than doubled for a third consecutive quarter, despite the fact that the company hasn’t submitted financial statements to the SEC since May. According to LSEG, analysts anticipate that revenue increased by more than 200% to $6.45 billion for the fiscal first quarter that concluded in September. This represents an increase from $1.9 billion in the same fiscal quarter of 2023 and $2.1 billion in the previous year.