Super Micro Computer shares rise 29% after the company says its review found “no evidence” of fraud
News

Super Micro Computer shares rise 29% after the company says its review found “no evidence” of fraud

Posted on by Amelia Pressman

Topline

Shares of information technology company Super Micro Computer closed down nearly 30% on Monday after the company said an independent committee found “no evidence of fraud or wrongdoing” after a difficult 2024 marked by governance concerns from a former auditor and others alleged accounting problems.

Important facts

Shares of Super Micro closed up 28.6% at $42, marking their highest level since late October.

Super Micro said an independent committee formed by the company’s board found “no evidence of fraud or misconduct by management” or the board, it said in a statement.

The committee was led by attorney Susie Giordano, an independent member of the Super Micro board specifically tasked with leading the investigation. It examined issues related to Super Micro’s export business, sales practices and the reinstatement of employees who resigned following a 2017 audit committee investigation into sales and revenue recognition practices.

The company says the investigation found that the conclusions of Ernst & Young, the former auditor who raised concerns about the company’s financial reporting and accounting practices in July, “were not supported by the facts examined in the review.”

Ernst & Young resigned as Super Micro’s auditor in October, saying in its resignation letter that it was parting ways because it was “unwilling to be associated with the financial statements prepared by management.”

The company says the committee recommended that Super Micro’s board appoint a new chief accounting officer (the company named vice president of finance Kenneth Cheung as its new accounting chief).

Shares of Super Micro are now up more than 47% year-on-year, although they have slumped for much of the last six months, falling 46% due to the dispute with Ernst & Young and delays in filing financial reports.

Ernst & Young did not immediately respond to Forbes’ request for comment.

Get Forbes text alerts on breaking news stories: We’re introducing SMS alerts so you’re always on top of the most important news breaking the day’s headlines. Text “Alerts” to (201) 335-0739 or sign up here.

What you should pay attention to

Super Micro is also facing a possible delisting from the Nasdaq due to the delayed financial reports. The company failed to file its annual report by the August due date and received a non-compliance letter from Nasdaq soon after. Super Micro also delayed filing its September quarterly report, but said in a statement that it expects to file annual and quarterly filings within Nasdaq’s discretionary deadline (Super Micro recently requested an extension to restore compliance).

Important background

Super Micro – maker of servers and IT products, including artificial intelligence devices – has had a rocky 2024. The company’s stock hit an all-time high of $118.81 in March and fell as low as $18 in November. Investors began selling Super Micro shares after the company said in August it would not file its annual report on time. The company also faced pressure from short-selling firm Hindenburg Research, which claimed it had found “glaring accounting red flags, evidence of undisclosed related party transactions, sanctions and export control failures, and customer issues.” However, JPMorgan analysts noted that some of the allegations made by Hindenburg were “difficult to verify,” noting that their report was “largely devoid of details about alleged wrongdoing at the company,” according to CNBC. Super Micro denied the allegations. The company was also reportedly the subject of a Justice Department investigation over alleged accounting violations raised by a former Super Micro employee, according to the Wall Street Journal.

Further reading

Super Micro Computer Shares Plunge Over 20% After Delayed Annual Report and Short-Seller Allegations (Forbes)

Justice Department investigates server maker Super Micro Computer (Forbes)

Leave a Reply

Your email address will not be published. Required fields are marked *