Super Micro Computer’s (NASDAQ: SMCI) recent stock plummet has left many investors questioning the stability of the artificial intelligence (AI) server maker. The news of Ernst & Young (EY) resigning as Super Micro Computer’s accounting firm sent shares tumbling over 40% in just a matter of days.
But what exactly is going on with Super Micro Computer? Let’s separate fact from speculation and dive into the recent events surrounding the company.
In 2017, Super Micro Computer faced delays in its financial reporting and underwent an internal audit that resulted in the departure of key executives, including the CFO at that time, Howard Hideshima. Fast forward to 2020, the Securities and Exchange Commission (SEC) charged Super Micro and Hideshima with “widespread accounting violations,” leading to a settlement where the company paid $17.5 million and the CFO paid $260,844.
In August, Hindenburg Research released a report alleging continued misconduct at Super Micro Computer, including rehiring key executives linked to the earlier accounting scandal and engaging in dubious accounting practices. The report also made allegations of inappropriate business dealings with Russia and questionable relationships between Super Micro Computer and other companies owned by the CEO’s brothers.
Following these allegations, the Department of Justice (DOJ) began investigating Super Micro Computer, further adding to investor concerns regarding the company’s practices. The recent resignation of Ernst & Young due to internal control and accounting practice concerns has only heightened the skepticism surrounding Super Micro Computer.
While these allegations are serious, it’s essential to note that they are just that – allegations. The company denies them, and investigations are ongoing. However, given the history of accounting violations and recent events, investor caution is advised.
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