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Super Micro Tumbles to Fifth in WSB Rankings Amid Auditor Resignation and Financial Turmoil

AInvestThursday, Nov 7, 2024 6:02 am ET
1min read

Super Micro Computer ranks fifth in the latest WSB standings, dropping three places from the previous day. The company experienced a sharp decline, with its stock dropping by 18.05% to a new low since April 2020. This downturn is attributed to several significant issues facing the company.

Recently, Super Micro released preliminary financial data for the first quarter of fiscal year 2025. The company projects net sales between $5.9 billion and $6 billion, revising its earlier estimate of $6 billion to $7 billion. Additionally, its cash reserves stand at approximately $2.1 billion, with total debts at about $2.3 billion.

The stock's dramatic decline was triggered by Ernst & Young's resignation as Super Micro's auditor and the company's failure to specify when it would file its 2024 annual report, a requirement to comply with Nasdaq rules. Concerns have emerged over the possibility of the company being delisted, adding to the stock's volatility.

Super Micro has yet to comply with Nasdaq's rules, with a looming deadline to submit its report by November 16. Previously, Nasdaq had issued a warning to the company on September 17 for failing to meet reporting obligations. Charles Liang, CEO of Super Micro, has stated that the company is actively working to appoint a new auditor to address these concerns.

Compounding the company's troubles is a report from Hindenburg Research, accusing Super Micro of "accounting manipulations" and other corporate governance issues. The research firm highlighted several red flags, including undisclosed related-party transactions and export control failures. In response, Super Micro has postponed the release of its annual reports, fueling rumors of internal investigations.

Despite the financial and legal challenges, Super Micro remains pivotal in the generative artificial intelligence boom, having benefited from the increased demand for technology supporting applications like ChatGPT. However, since hitting a peak valuation of $67 billion in March 2024, its stock has plummeted, and its market performance remains under scrutiny.

The company's 2024 fiscal year revenue showed significant growth, with sales reaching $14.94 billion, a 109.7% increase over the previous year. Nevertheless, investor confidence has been shaken, and the company's previously high valuation has sharply declined amid ongoing issues.

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