Super Micro Computer’s shares plunge after accounting firm resigns

Shares of Super Micro Computer plunged by a third at midweek after the server maker disclosed that Ernst & Young had resigned as its public accounting firm.

According to a regulatory filing from Super Micro, EY resigned while conducting an audit for the tech company’s most recent fiscal year. The accounting firm communicated concerns in July over issues like transparency and internal control related to financial reporting, Wednesday’s filing notes, later prompting Super Micro’s board to enlist a review.

Additional information received during this review then led EY to raise questions about whether Super Micro “demonstrates a commitment to integrity and ethical values”, the company added, as well as transparency and oversight independent of the CEO and other management.

The Associated Press reached out to EY for a statement Wednesday. Super Micro’s regulatory filing notes EY’s resignation letter stated, in part, that it would “no longer be able to rely” on representations from the company’s management and audit committee – and concluded it could no longer provide audit services “in accordance with applicable law or professional obligations.”

EY sent its resignation letter the previous week, according to Wednesday’s filing, which noted that the company’s review is ongoing. The audit would’ve been the EY’s first on Super Micro’s behalf.

In a statement, Super Micro said that it disagreed with EY’s decision to resign – and was now “working diligently” to select new auditors. The company added that it does not expect “a resolution of the matters raised by (EY)” to result in any restatements of previous-reported quarterly financial results, and will provide a business update next week.

The accounting firm’s resignation arrives just two months after short-selling firm Hindenburg Research released a report alleging ample accounting manipulation at Super Micro, pointing to “glaring accounting red flags” and evidence of undisclosed transactions. It also accused Super Micro of rehiring top executives that were directly involved in a 2018 scandal. At the time of August’s report, Super Micro said it would not comment “on rumours and speculation.”

Following these accusations, The Wall Street Journal reported last month that the Justice Department was beginning a probe into Super Micro, citing people familiar with the matter. Back in 2020, the Securities and Exchange Commission also charged Super Micro with improper accounting for “prematurely recognising revenue and understating expenses” beginning at least as early as fiscal 2015 to 2017. The company paid a US$17.5 million civil penalty.

Super Micro has been among tech companies recently riding a the artificial intelligence wave. Despite the company’s recent plummet, shares are still up about 17 per cent year to date.

In August, Super Micro reported fourth-quarter revenue of US$5.31 billion, a more than 143 per cent increase over the US$2.18 billion it reported in the same quarter of 2023.

AP