Super Micro Computer (SMCI) has been making headlines recently after announcing a delay in filing its annual report, causing its stock to plunge by 18% early Wednesday. This delay came on the heels of a report by short-seller Hindenburg Research, which raised concerns about potential “accounting manipulation” at the company.
The reason for the delay, according to SMCI, is the need for additional time for management to assess the design and operating effectiveness of its internal controls over financial reporting as of June 30, 2024. This development has caused the stock to plummet, with shares dropping more than 60% from their peak in March. Despite this setback, Super Micro stock is still up 50% year to date and recently announced a 10-for-1 stock split effective October 1.
Hindenburg’s report highlighted several red flags, including undisclosed related party transactions, sanctions and export control failures, and customer issues. The firm also revealed that it had taken a short position in Super Micro. This news comes after Super Micro settled with the SEC in August 2020 for $17.5 million following an investigation into accounting violations.
The report quoted a former salesperson who mentioned that many of the senior executives who were let go amid the scandal were later rehired, indicating a lack of improvement in the company’s business practices. Pressure to meet quotas reportedly led salespeople to engage in questionable tactics, such as shipping defective products or using partial shipments around quarter-end.
Despite these challenges, Super Micro has been a prominent player in the data center server and management software industry, riding the wave of artificial intelligence. The company’s partnership with AI chipmaker Nvidia has also garnered attention from investors.
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