Super Micro Computer (SMCI) saw its stock plummet by as much as 26% on Wednesday following an announcement that the company would delay filing its annual report for the fiscal year ending June 30. This decision came hot on the heels of a report by Hindenburg Research, a noted short seller, which accused the company of “accounting manipulation” and other questionable practices.
⚡SMCI Stock Plunges As Super Micro Computer Delays 10-K Filing
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Super Micro stated that it couldn’t complete its annual report on time without “unreasonable effort or expense.” The company explained that additional time was needed for management to finalize an assessment of its internal controls over financial reporting for the period ending June 30, 2024.
Earlier this year, Super Micro’s stock saw a dramatic surge, rising from $290 in January to around $1,200 by March, driven by investor enthusiasm around its role in the artificial intelligence sector. The company was added to the S&P 500 in March and later to the Nasdaq 100 in July. However, since its peak, the stock has fallen by over 60%, although it remains up 50% year-to-date. In a recent move to appeal to more investors, Super Micro announced a 10-for-1 stock split, set to take effect on October 1.
The company’s shares dipped by about 2% on Tuesday after Hindenburg Research revealed findings from a three-month investigation. The firm reported “glaring accounting red flags, evidence of undisclosed related party transactions, sanctions and export control failures, and customer issues.” Hindenburg also disclosed it had taken a short position in Super Micro, betting that the stock would decline.
Super Micro, known for its data center servers and management software, had capitalized on the AI boom this year, partly due to its business dealings with AI chipmaker Nvidia. However, the company now faces intense scrutiny from investors and short sellers alike.
The steep drop in Super Micro’s stock price on Wednesday provided a windfall for short sellers, who gained over $1.07 billion in midday mark-to-market profits. According to S3 Partners, short sellers have been aggressively increasing their positions since the stock was trading in the $900s in April. Their efforts have paid off, with more than $2.85 billion in profits since mid-July alone, including the gains from Wednesday’s sharp decline.
Amidst the turmoil, CFRA analysts downgraded Super Micro’s stock from a “Buy” to a “Hold,” citing the uncertainty surrounding the delayed financial report and potential reputational damage. Shreya Gheewala, a senior equity analyst at CFRA Research, noted that while the evidence from Hindenburg does not conclusively prove significant wrongdoing, the delay in the 10-K filing and possible harm to the company’s reputation are concerning.
Hindenburg’s report also highlighted a troubling history with Super Micro, referencing a $17.5 million settlement with the SEC in August 2020 for “widespread accounting violations.” The report suggested that despite this settlement, the company’s business practices had not improved, alleging that many of the executives involved in past misconduct were rehired. According to the report, there was ongoing pressure on sales teams to inflate figures by using questionable practices such as “channel stuffing” and shipping defective products at the end of financial quarters.
SMCI Stock Plunges As Super Micro Computer Delays 10-K Filing https://t.co/Zdy8yFHxnP $SMCI
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Super Micro now faces a period of heightened scrutiny and potential instability as it addresses the allegations and works to file its delayed annual report. Investors and market watchers will be closely monitoring the company’s next moves, especially as short sellers continue to capitalize on its declining stock price.
Key Points:
i. Super Micro Computer’s stock dropped by 26% after announcing a delay in its annual report filing, following accusations of accounting manipulation by Hindenburg Research.
ii. The company cited the need for more time to complete assessments of its financial controls as the reason for the delay.
iii. Despite a dramatic rise earlier this year due to its involvement in the AI sector, Super Micro’s stock has fallen over 60% from its March peak.
iv. Short sellers have profited significantly from the stock’s decline, gaining over $2.85 billion since mid-July.
v. CFRA downgraded the stock to a “Hold” amid concerns over the delayed report and potential reputational damage, while Hindenburg’s report alleges continued questionable practices at the company.
Kirk Volo – Reprinted with permission of Whatfinger News
