Shares of Super Micro Computer (NASDAQ: SMCI), a leader in AI server technology, have been experiencing a downtrend for the past three days due to the fallout from its auditor’s resignation. The stock closed down 10.5% and has dropped a total of 47% over the last three days following the news.
This decline in Super Micro Computer’s stock price was triggered by Ernst & Young (EY) resigning as the company’s accounting firm. This development came shortly after Super Micro Computer announced a delay in filing its 10-K report and faced negative attention from Hindenberg Research, a prominent short-seller.
Despite these challenges, Super Micro Computer, also known as Supermicro, has stated that it doesn’t expect to need to restate any of its quarterly reports. EY was in the process of auditing the company’s financial statements for the fiscal year ending June 30, 2024, and had not yet provided a final report to Supermicro.
The disagreements between EY and Supermicro arose during the audit process, particularly regarding the company’s adherence to internal control frameworks. EY’s decision to resign was based on its inability to rely on management’s representations and its desire to distance itself from Supermicro’s financial statements.
While Supermicro’s management expressed disagreement with EY’s decision, the stock’s significant drop is not unexpected. Auditor resignations of this nature are rare, especially following the company’s delay in filing its 10-K report and the negative attention from Hindenberg Research.
Super Micro Computer is scheduled to release its fiscal first-quarter earnings after hours on Tuesday. Investors will be closely watching for a satisfactory explanation from management regarding EY’s departure and clarity on the completion timeline for the 10-K report. Failure to provide these explanations could lead to further declines in the stock price.
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