The shares of Super Micro Computer, known for producing artificial intelligence (AI) servers, experienced a decline for the third consecutive day due to ongoing repercussions from the resignation of its auditor. The stock concluded the day with a 10.5% drop, representing a 47% decrease over the past three days since the announcement.
The current financial challenges began when Super Micro Computer disclosed on Wednesday that its accounting firm, Ernst & Young (EY), had resigned. This announcement followed the company’s decision to delay its 10-K report and a critical report from Hindenburg Research. Despite these circumstances, Super Micro Computer, also referred to as Supermicro, stated that it does not expect to restate any quarterly reports. EY was in the process of auditing the fiscal year ending June 30, 2024, but had not yet delivered a report on Supermicro’s financial statements.
Disagreements had arisen during EY’s audit, particularly regarding Supermicro’s adherence to internal control frameworks. EY conveyed its decision to resign due to concerns about the reliability of management’s disclosures and its unwillingness to be associated with the financial statements of the company.
Supermicro’s management expressed disagreement with EY’s decision, although the sharp decline in its stock was not unexpected. A resignation of an auditor in such circumstances is highly unusual, and the situation is made more suspicious given the delay of the 10-K report and the attack from Hindenburg Research.
Supermicro is planning to announce its fiscal first-quarter earnings after trading hours on Tuesday. If the management fails to provide a satisfactory explanation for EY’s departure and clarity on the completion of the 10-K report, further declines in the stock value are anticipated.
