Charles Liang, CEO of Super Micro Computer Inc., during the Computex conference in Taipei, Taiwan, Wednesday, June 5, 2024. The trade show runs through June 7.
Annabelle Chih | Bloomberg | Getty Images
Super Micro investors continued to rush the exits on Friday, pushing the stock up another 9% and taking this week’s selloff to 44%, after the data center company lost its second auditor in less than two years.
The company’s shares fell as low as $26.23, erasing all gains for 2024. Shares had peaked at $118.81 in March, at which point they had more than quadrupled for the year. Earlier that month, the S&P Dow Jones added the stock to the S&P 500 and Wall Street was rallying around the company’s growth, fueled by sales of servers packed with of Nvidia artificial intelligence processors.
Super Micro’s spectacular collapse since March has wiped out roughly $55 billion in market cap and left the company at risk of being delisted from the Nasdaq. On Wednesday, as the stock was in the midst of its second-worst day ever, Super Micro said it will provide a “business update” related to its latest quarter on Tuesday, which is U.S. Election Day.
The company’s latest challenges date back to August, when Super Micro said it would not file its annual report on time with the SEC. Well-known vendor Hindenburg Research subsequently disclosed a short position in the company and wrote in a report that it identified “new evidence of accounting manipulation.” The Wall Street Journal later reported that the Justice Department was in the early stages of an investigation into the company.
Super Micro revealed on Wednesday that Ernst & Young had resigned as its accounting firm just 17 months after taking over from Deloitte & Touche. The auditor said he was not willing to be bound by the financial statements prepared by management.
A spokesperson for Super Micro told CNBC that the company “does not agree with E&Y’s decision to resign and we are working diligently to elect new auditors.” Super Micro does not expect the matters raised by Ernst & Young “to result in any restatement of its quarterly financial results for the fiscal year ended June 30, 2024, or for prior fiscal years,” the representative said.
Analysts at Argus Research on Thursday downgraded the stock in the interim, citing the Hindenburg memo, reports of the Justice Department investigation and the departure of Super Micro’s accounting firm, which analysts called a “serious matter.” Argus’ fears go beyond accounting irregularities, with the firm suggesting the company may be doing business with problematic entities.
“The DOJ’s concerns, in our view, may be primarily about related party transactions and SMCI products ending up in the hands of sanctioned Russian companies,” the analysts wrote.
In September, a month after announcing the filing delay, Super Micro said it had received a notice from Nasdaq indicating that its delayed status meant the company was not in compliance with the exchange’s listing rules. Super Micro said Nasdaq rules allowed the company 60 days to file its report or submit a plan to regain compliance. Based on that timeline, the deadline would be mid-November.
Although Super Micro hasn’t filed financials with the SEC since May, the company said in an earnings presentation in August that revenue doubled for a third straight quarter. Analysts expect that, for the fiscal first quarter ended in September, revenue rose more than 200% to $6.45 billion, according to LSEG. That’s up from $2.1 billion a year ago and $1.9 billion in the same quarter of fiscal 2023.
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