Super Micro Shares Plunge After Short Seller Report & Delayed Annual Report
Super Micro Computer (SMCI) stock plummeted by as much as 18% in early trading on Wednesday after the company announced a delay in filing its annual report for the fiscal year ending June 30. This follows a scathing report from short seller Hindenburg Research, which accused the artificial intelligence (AI) hardware specialist of "accounting manipulation".
In a statement, Super Micro said it was unable to file the report within the prescribed timeframe without unreasonable effort or expense. The company cited the need for additional time to complete an assessment of the effectiveness of its internal controls over financial reporting.
This delay comes after a dramatic rise in Super Micro's share price, which soared from £230 in early January to around £960 by March. The company was subsequently added to the S&P 500 in March. However, the stock is now down over 60% from its March peak, despite still being up 50% year-to-date. The company recently announced a 10-for-1 stock split, effective 1 October.
Tuesday saw a 2% decline in Super Micro's share price after Hindenburg published its report. The research firm, which has taken a short position in Super Micro, claimed a three-month investigation uncovered "glaring accounting red flags", "evidence of undisclosed related party transactions", "sanctions and export control failures", and "customer issues".
The report alleged that despite a £14 million settlement with the Securities and Exchange Commission (SEC) in August 2020 following an inquiry into "widespread accounting violations", Super Micro's business practices had not improved. Hindenburg also claimed that senior executives who had left the company amid the scandal were later rehired.
The report quoted a former salesperson who said, "Almost all of them are back. Almost all of the people that were let go that were the cause of this malfeasance." Hindenburg also asserted that, "Even after the SEC settlement, pressure to meet quotas pushed salespeople to stuff the channel with distributors using 'partial shipments' or by shipping defective products around quarter-end, per our interviews with former employees and customers."
The company, which manufactures data centre servers and management software, has captured investor interest this year as it has ridden the AI wave. Super Micro sources components from AI chipmaker Nvidia (NVDA).
Hindenburg concluded its report by labelling Super Micro a "serial recidivist", a term often used to describe someone who repeatedly commits crimes after being punished.
Super Micro has not yet responded to Hindenburg's allegations, but the company's stock price is likely to remain under pressure until it provides further clarification.
