What’s the best way for a growth company to make an active short seller feel one-hundred percent justified in publishing negative articles? By almost immediately helping to stoke some of the concerns brought up! Super Micro Computer, Inc. (NASDAQ: SMCI) now find itself caught in the headlights — but is it a wolf or a deer?
Shares of Super Micro Computer fell on Tuesday after Hindenburg Research published a short-seller report outlining some woes of the company. That “short report” alleged that accounting manipulation, sibling self-dealing, and sanction evasion. Some of Super Micro’s woes were known according to research seen (see below). And some of the woes “may” have been blown out of proportion. But what does it say when a company just lines up the rationale as a packaged gift to the sellers?
Super Micro Computer issued an SEC filing on Wednesday morning communicating to shareholders that it expects that it will not timely file its Annual Report on time for the fiscal year ended June 30, 2024. The filing said:
SMCI is unable to file its Annual Report within the prescribed time period without unreasonable effort or expense. Additional time is needed for SMCI’s management to complete its assessment of the design and operating effectiveness of its internal controls over financial reporting as of June 30, 2024. SMCI has not made updates to its results for the fiscal year and quarter ended June 30, 2024 that were announced in SMCI’s press release dated August 6, 2024.
Sadly, JPMorgan tried to defend SMCI this same morning by maintaining its Overweight rating on Super Micro after the Hindenburg Research report. The team at JPMorgan noted that there seems to be limited evidence of accounting mistreatments beyond revisiting the 2020 charges from the SEC. The team also opined that there was limited new information relative to SMCI’s existing and already-known business relationship with related companies owned by the siblings of the founder. JPMorgan also noted that allegations relative to sanction evasion will be difficult to verify. JPMorgan even showed the report to be largely void of details regarding alleged wrongdoings that change the medium-term outlook for its huge total addressable market in AI.
In mid-day trading on Wednesday, Super Micro Computer shares were down another 27% at $399.00 and more than 24 million shares had traded hands just after the noon point in the trading day. The stock fell about 2.7% to $547.64 on 11.6 million shares on Tuesday and it was more than a $600 stock at the end of last week.
Super Micro may still have a very large growth path ahead. Unfortunately, this is a time when investors have to seriously take a look at what they own and make a decision to hold or sell. And new buyers have to decide whether they should buy or avoid the stock. On the surface this is still one of the top beneficiaries of the incredible AI market shift. And under the scenes, investors are going to have a very difficult time trusting management until more clear responses and data are released.
The other issue that is hard to imagine is that it was in January of 2024 that the stock chart went parabolic. It rose from a base of about $300 in January to a very brief peak above $1,200 in March.
It is hard to imagine that this was a $1,100 and $1,200 stock as recently as March-2024. Now AI investors have to only hope the other companies they invested in for the growth of AI are not in the same boat as Super Micro.
