This week, Super Micro's 44% decline erased its yearly stock growth.

This week, Super Micro's 44% decline erased its yearly stock growth.
This week, Super Micro's 44% decline erased its yearly stock growth.
  • On Friday, Super Micro's stock dropped another 9%, resulting in a 44% loss for the week.
  • On Wednesday, the company experienced its steepest decline after losing its second auditor in less than two years.
  • Super Micro, who is behind schedule on submitting its annual report, will release a "business update" for the most recent quarter on Election Day in the U.S.

The stock of the data center company fell by 9% on Friday, bringing the total selloff for the week to 44%, after losing its second auditor in less than two years.

In March, the company's shares reached a high of $118.81, resulting in a fourfold increase for the year. However, by the end of the month, the stock had fallen as low as $26.23, erasing all gains for 2024. S&P Dow Jones had added the company to the S&P 500 earlier that month, and Wall Street had been optimistic about the company's growth due to its sales of servers containing artificial intelligence processors.

Since March, Super Micro's market cap has decreased by approximately $55 billion, putting the company at risk of being delisted from the Nasdaq. On Wednesday, as the stock experienced its second-worst day ever, Super Micro announced that it would provide a "business update" regarding its latest quarter on Tuesday, which is Election Day in the U.S.

Since August, the company has faced challenges, including not filing its annual report on time with the SEC and being the subject of a short position by Hindenburg Research, which claimed to have found "fresh evidence of accounting manipulation." The Wall Street Journal later reported that the Department of Justice was investigating the company.

On Wednesday, Super Micro announced that Ernst & Young had resigned as its accounting firm after only 17 months of taking over from Deloitte & Touche. The auditor stated that they were "unwilling to be associated with the financial statements prepared by management."

Super Micro has stated that it disagrees with Ernst & Young's decision to resign and is actively seeking new auditors. The company does not anticipate that the issues raised by E&Y will lead to any restatements of its quarterly financial results for the fiscal year ended June 30, 2024, or for any prior fiscal years, according to a spokesperson.

On Thursday, analysts at Argus Research downgraded Super Micro's stock to a hold in the intermediate term due to concerns about the Hindenburg note, Justice Department investigation, and the departure of the company's accounting firm. The analysts also expressed fears that the company may be involved in questionable business practices.

In our opinion, the DoJ's concerns primarily revolve around related-party transactions and the potential for SMCI products to be used by sanctioned Russian companies.

In November, Super Micro announced that it had received a notification from the Nasdaq stating that its late status meant the company was not in compliance with the exchange's listing rules. The Nasdaq's rules allowed the company 60 days to file its report or submit a plan to regain compliance.

Despite not submitting financials to the SEC since May, Super Micro reported in an August earnings presentation that revenue more than doubled for a third consecutive quarter. It is predicted that for the fiscal first quarter ended September, revenue increased more than 200% to $6.45 billion, according to LSEG. This is a significant increase from $2.1 billion in the previous year and $1.9 billion in the same fiscal quarter of 2023.

Jim Cramer is unsure of Super Micro's guilt or innocence, according to a report.

I don't know if Super Micro is guilty or innocent, says Jim Cramer
by Ari Levy

Technology