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Super Micro Computer (SMCI.US) review passes, but JPMorgan advises to stay on the sidelines

AInvestTuesday, Dec 3, 2024 8:50 am ET
1min read

Zhitong Finance learned that Morgan Stanley, an investment firm, said it would remain cautious about Super Micro Computer (SMCI.US) until it had a better understanding of compliance issues, despite an independent special committee appointed by the board of Super Micro Computer finding no wrongdoing. Morgan Stanley analyst Samik Chatterjee maintained a "sell" rating on Super Micro Computer.

Chatterjee said: "We believe the next key questions for investors to focus on include: whether the new independent auditor BDO accepts the findings of the special committee or decides to conduct its own independent review; and whether Nasdaq supports Super Micro Computer's request for an extension to regain compliance with Nasdaq's continued listing requirements. Super Micro Computer has outlined its intention to complete its 10-K and 10-Q filings within the compliance period.

Super Micro Computer said on Monday that an independent special committee found no evidence of wrongdoing by the board or the audit committee. The company also said it expects to not restate its financial statements as a result of the committee's review, though the committee did recommend the hiring of a new chief financial officer.

The company said it would immediately begin the search for a new CFO, with current CFO David Weigand continuing in his role until a replacement is named. In a statement on Monday, the company noted that the special committee had completed its comprehensive review and confirmed that the conclusions presented by the former auditor when they resigned "did not match the facts discovered during the review." The statement boosted market confidence, and the company's stock rose nearly 29% on Monday. As of writing, the stock continued to rise before the market opened on Tuesday, up more than 7%.

Super Micro Computer has been in the spotlight amid the AI boom, as demand for its AI application servers has increased. However, the company has faced some challenges, including failing to file its financial reports on time and replacing its auditor. The stock had a 10% or more fluctuation on 10 of the 19 trading days in November.

Earlier, the company's auditor, Ernst & Young, resigned. Super Micro Computer said it expects to file its financial reports on time and without restating prior financial statements. However, the company still faces the risk of Nasdaq delisting due to its failure to file its annual report and its most recent quarterly report.

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