Hindenburg's 'New Prey': Super Micro Computer Accused of Multiple Violations
AInvestWednesday, Aug 28, 2024 1:29 am ET
2min read
SMCI --

Short-seller Hindenburg Research has found a new target. On Tuesday, the research firm said it would short-sell Super Micro Computer, a server equipment manufacturer that has become popular in the investment community due to the boom in artificial intelligence.

Hindenburg pointed out that the investigation found obvious accounting manipulation, undisclosed related party transactions, sanctions, control evasion, and other issues at Super Micro Computer.

In 2020, Super Micro Computer was fined by the U.S. Securities and Exchange Commission, admitting that it had accounting and disclosure issues from 2014 to 2017, and promised not to violate regulations in the future. This also makes some observers believe that Hindenburg's attack on Super Micro Computer is not unfounded.

On Tuesday, Super Micro Computer's stock price fell by 8.7% at one point, and the decline narrowed to 2.6% at the close. A spokesperson for Super Micro Computer said the company would not comment on false rumors and speculation.

Although Super Micro Computer's attitude is firm, the industry believes that Hindenburg's report will lead to stricter supervision of Super Micro Computer and increase attention to its customers, as it is currently a sensitive time for the United States to upgrade restrictions on the overseas sale of artificial intelligence.

Super Micro Computer's main business is high-performance servers for data centers, and this business has developed vigorously with the expansion of artificial intelligence demand, boosting the revenue of Super Micro Computer.

In the fiscal year ending in June, Super Micro Computer's revenue doubled to $14.9 billion. The company also expects revenue to double again in this fiscal year, reaching $28 billion. This good performance has also driven the stock price of Super Micro Computer.

So far this year, the company's stock price has risen by more than 90%. Since 2019, Super Micro Computer's stock price has risen by at least 30% annually, and last year it rose by 250%. The soaring market value and optimistic prospects also promoted Super Micro Computer to be included in the S&P 500 index in March.

However, in Hindenburg's view, the prosperity of Super Micro Computer is obviously a short-lived scene. According to Hindenburg, the executives who resigned from Super Micro Computer in 2020 due to the scandal have almost all returned to the company, which is also the root of Super Micro Computer's inability to improve its business behavior.

According to former employees and customers of Super Micro Computer, even after settling with the U.S. Securities and Exchange Commission, performance pressure still forces sales personnel to deliver goods by substituting inferior products or intentionally damaging them, and Hindenburg describes the company as a recidivist.

The problems pointed out in this report are likely to have a significant impact on Super Micro Computer's market share and may lead to its competitors, such as HP and Dell, to overtake. At the same time, the troubles of Super Micro Computer may also affect its customers and suppliers, such as Tesla, which completely purchases servers from Super Micro.

Investors are still watching the impact of Hindenburg's report, but its brilliant historical record, such as defeating Indian tycoon Adani and hitting the entire Indian stock market, may indicate that Super Micro Computer is not easy to get out of this time.

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