Shares of Super Micro Computer (NASDAQ: SMCI), known for producing artificial intelligence (AI) servers, have been falling for three consecutive days. This decline comes in the wake of an unexpected resignation from its auditor.
Today, the stock fell by 10.5%, marking a staggering 47% drop over the last three days since the resignation announcement.
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Ongoing Financial Turmoil
On Wednesday, the company disclosed in a filing that its accounting firm, Ernst & Young (EY), had resigned. This occurred after Supermicro requested to delay its 10-K report and faced scrutiny from Hindenburg Research.
Despite this setback, Supermicro stated it does not expect to restate any quarterly reports. The company has indicated that EY was in the process of auditing its finances for the fiscal year that ended on June 30, 2024, without issuing a comprehensive report on those financial statements.
Conflicts arose during EY’s audit concerning Supermicro’s compliance with internal control guidelines. EY cited a lack of trust in management’s statements as the reason for its resignation, choosing not to be associated with Supermicro’s financial disclosures.
Implications for Supermicro
Management has expressed disagreement with EY’s resignation, yet the substantial drop in stock value is not entirely unexpected. Auditor resignations occur rarely, especially under such conditions. The timing, following the delay of the 10-K report and criticism from Hindenburg Research, raises additional concerns for investors.
Supermicro is set to publish its fiscal first-quarter earnings after the market closes on Tuesday. Should the leadership fail to provide convincing explanations regarding EY’s departure or the timeline for the 10-K report, further declines in stock prices could ensue.
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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views expressed in this article are those of the author and do not necessarily reflect those of Nasdaq, Inc.
