Super Micro Computer, Inc. (NASDAQ: SMCI) was previously featured by Oggonomics as being caught in the headlights. But was it a deer or a wolf that was caught in those headlights? Now things have gone from bad to worse to worse, even after a DOJ investigation came after allegations of accounting manipulation.
This has been updated below based on the halt and anticipated halt(s).
October 30, 2024 is the day that may be known as “the day everything was forced to change” at SMCI. Ernst & Young LLP (EY) has resigned as SMCI’s auditor. While SMCI’s own release in its SEC filing said it does not believe this “will result in any restatements of its quarterly reports for the fiscal year 2024 ending June 30, 2024, or for prior fiscal years” it’s a pretty damning move as the stock was down over 30% with massive trading volume on the news.
SMCI also said it disagrees with EYs decision to resign, but EY is said in the filing that it is no longer able to relay on management and audit committee representations. It also includes a note that it is unwilling to be associated with financial statements prepared by management.
Shares of SMCI were last seen trading down 31% at $33.90 on Wednesday morning.
The big drop in August was after Hindenburg Research published a short-seller report had accused SMCI of accounting manipulation, sibling self-dealing, and sanction evasion. SMCI then almost immediately issued an SEC filing communicating to shareholders that it did not expect to timely file its annual report on time for the fiscal year ended June 30, 2024. That 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.
Whether or not this results in a long-term trading halt has yet to be seen (as of the time of publishing). There were nearly 20 million shares that traded in the pre-market reporting on Wednesday alone, and total trading volume of 50 million shares was seen by 9:43 am Eastern Time. SMCI shares were down about 29% at $34.85 right after the opening bell and its 52-week trading range is $22.74 to $122.90.
When companies face waves of issues like this, some analysts may have to suspend coverage pending the outcome of what happens. And in some cases, the trading halts can be for extended periods of time rather than just for price spikes and news dissemination.
This was the view of Oggonomics around the last coverage:
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.
That view has only been echoed in this latest development. Oggonomics has no formal rating nor any price target on SMCI, nor does it hold any positions in or have any ties to this company.
Shares of SMCI were halted at 9:57 am Eastern on volatility, down 23.8% at $37.42 with more than 72.8 million shares having traded.
