Super Micro Shares Plunge 18% Amid Financial Reporting Delays, Auditor Resignation, and Nasdaq Delisting Risk
Super Micro’s stock took a sharp 18% dive on Wednesday, hitting its lowest point since June 2022, as the company faces mounting challenges in both financial reporting and corporate governance. The plunge follows the release of disappointing preliminary financial results and ongoing uncertainty regarding its Nasdaq listing status.
As of Wednesday afternoon, Super Micro shares were trading at $22.70, marking an 81% decline from their March peak of $118.81. This precipitous fall has slashed nearly $57 billion from the company’s market cap, casting a shadow over what was once a high-flying stock in the tech sector. Super Micro’s stock saw remarkable gains in recent years, jumping 246% in 2022 and 87% in 2023, driven by surging demand for its servers equipped with Nvidia's powerful AI processors.
However, the company is now grappling with serious challenges. Super Micro has not filed audited financial statements since May, and its delay in meeting financial reporting obligations has put it at risk of delisting from Nasdaq if it fails to file with the SEC by mid-November. On Tuesday, Super Micro revealed preliminary first-quarter results, noting it still couldn’t confirm when audited annual financials would be available.
Further fueling investor unease, Ernst & Young, the company’s second auditor in less than two years, recently resigned. Ernst & Young’s departure has led to increased scrutiny from both analysts and investors, as it comes amidst allegations by an activist investor that Super Micro engaged in accounting irregularities and potentially violated export controls by shipping sensitive technology to sanctioned entities.
On a conference call with analysts, CEO Charles Liang refrained from commenting on Ernst & Young’s resignation or addressing governance concerns, emphasizing that the company is focused on securing a new auditor. Super Micro’s management team has signaled that it is “working with urgency to become current again with our financial reporting,” Liang said.
Preliminary Financial Results Miss Expectations
For the quarter ending September 30, Super Micro reported unaudited net sales between $5.9 billion and $6 billion, falling short of analysts’ expectations of $6.45 billion. Nonetheless, this range represents a substantial 181% increase from the previous year, underscoring continued demand for AI-powered server technology. The company has benefited from its close partnership with Nvidia, which supplies processors for Super Micro’s AI server products. The recent release of Nvidia’s latest GPU, known as Blackwell, is expected to further drive demand.
When pressed by analysts about when Blackwell-related revenue would appear in financials, Liang noted that Super Micro is “asking Nvidia every day,” stressing that they have “the deepest of relationships” with Nvidia. CFO David Weigand further clarified that there have been “no changes to allocations” for Nvidia GPUs, aiming to dispel any concerns that other server makers might gain an advantage.
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Q2 Forecast Falls Short of Analyst Estimates
Looking ahead, Super Micro forecasted revenue for the December quarter to range from $5.5 billion to $6.1 billion, falling below analysts’ average estimate of $6.86 billion, according to LSEG. Projected adjusted earnings per share for the quarter also came up short, estimated at 56 to 65 cents, below the analyst consensus of 83 cents.
The company’s guidance has raised questions among analysts. Wedbush, which rates the stock as a “hold,” noted that the recent disclosures “left more questions than answers” and highlighted the significant hurdles facing Super Micro in restoring investor confidence. Meanwhile, Mizuho suspended coverage of the stock on Wednesday, citing “a lack of full financial details and audited statements.”
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Governance Challenges and Special Committee Findings
Amid growing scrutiny, Super Micro’s board formed a special committee to investigate concerns raised by Ernst & Young. Following a three-month review, the committee found “no evidence of fraud or misconduct” by the company’s management. However, the committee recommended that Super Micro adopt “remedial measures to strengthen internal governance and oversight functions.” The company expects to receive the committee’s full report shortly and has committed to implementing all necessary actions to retain its Nasdaq listing.
As Super Micro navigates these governance and regulatory issues, the stakes remain high. A Nasdaq delisting could severely impact the company’s stock liquidity and investor base, adding to the ongoing challenges it faces.
