Super Micro's stock price drops 35% after auditor resigns following earlier concerns.

• Last week, Super Micro lost Ernst & Young as its auditor due to concerns over the company's internal controls, board independence, and accounting practices.
• Earlier this year, Super Micro was hit with a short-seller report, delayed filing its financial statements for 2024, and is currently under federal investigation.
• EY stated in its resignation letter that it was "unwilling to be linked" with management's financial statements.

The company's shares plummeted by 35% on Wednesday morning after its auditor resigned following a disagreement over governance and board independence.

In its resignation letter, Ernst & Young stated that it was "unwilling to be associated with the financial statements prepared by management" and raised concerns about the board's independence from CEO Charles Laing and "other members of management."

Super Micro has yet to release its financial statements for the 2024 fiscal year, and is currently under federal investigation. EY was hired to audit the company for the first time during this period.

Super Micro produces servers that businesses use for websites, data storage, and other applications, including AI algorithms. Notable customers of the company include major players in AI such as ,  and . In 2023, the shares of Super Micro, which joined the S&P 500 in March, surged 246%.

In late July, Super Micro's internal financial controls, governance, and forthcomingness were first flagged by an auditor, leading the server firm to establish a special board committee to investigate its internal controls.

EY has resigned due to new information that has caused them to lose trust in management and the Audit Committee's representations. Their concerns were previously raised before a short-seller report criticized Super Micro's financial controls and accounting practices.

The Securities and Exchange Commission fined Super Micro $17.5 million in 2020 for prematurely and improperly recording revenue.

Super Micro has engaged law firm Cooley and a forensic accounting firm to examine its internal controls, and the review is still ongoing, according to a regulatory filing by the company.

Neither Super Micro nor Ernst & Young responded to a request for comment from their representatives.