Market Volatility: Super Micro Computer Stock Takes a Hit
Accounting Woes Spark Concern
Super Micro Computer’s stock plummeted over 14% on Thursday, wiping out its year-to-date gains, after a recent filing revealed that Ernst & Young (EY) had resigned as the company’s auditor. This development has raised significant concerns about the server maker’s financial health.
Resignation Sparks Investigation
The resignation came amidst an ongoing investigation by the Department of Justice, which was launched in August following a report by short-seller firm Hindenburg Research alleging “accounting manipulation” at Super Micro Computer. The investigation has cast a shadow over the company’s financial dealings.
Analysts Weigh In
In response to the news, Argus downgraded Super Micro Computer to Hold from Buy, citing the loss of its auditing firm and the ongoing DoJ investigation. Analysts at Needham and Wells Fargo also suspended coverage of the company. According to Argus analyst Jim Kelleher, “The company’s loss of its auditing firm and the DoJ investigation mean that the stock no longer trades on fundamentals.”
Road to Recovery
To regain investor confidence, Super Micro Computer needs to engage with a new accounting firm, become timely on its filings, and resolve all matters before the DoJ. Until then, the stock’s future remains uncertain.
EY’s Resignation Letter
In its resignation letter, EY stated that it could no longer rely on management’s and the Audit Committee’s representations and was unwilling to be associated with the financial statements prepared by management. Super Micro Computer has disputed EY’s decision, stating that it is “working diligently to select new auditors.”
Stock Performance
Super Micro Computer’s stock had soared over 300% in the first three months of the year, driven by the AI craze. Despite the accounting scrutiny, the stock had remained positive for the year until Thursday’s decline. Year-to-date, the stock is now down over 1%.
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