Like a frog in a pot of boiling water, things get increasingly uncomfortable for super microcomputers. (SMCI -11.41%) As time progresses.
SuperMicro’s accounting debacle is widening and began in late August as the subject of a short Hindenburg Research report. Just one day later, the company postponed its 10-K filing. The Wall Street Journal reported that the Justice Department launched an investigation into the company over accounting issues in September, and Ernst & Young’s resignation as the company’s auditor last month was a clear red flag.
The company has since reported preliminary financial results for the first quarter of fiscal 2025, but provided little clarity on the status of its 10-K filing or other issues. Unsurprisingly, the company also just requested a postponement of its 10th quarter report.
As a result, the stock price has fallen 65% since Hindenburg released its report.
Investors looking to see where Supermicro goes next may not have to wait long, as these issues could surface next week. There are two main reasons for this.
Image source: Getty Images.
1. The NASDAQ market deadline is approaching
Supermicro received a notice from Nasdaq on September 17 that it was not in compliance with the exchange’s rules requiring timely filing of reports with the Securities and Exchange Commission (SEC). According to the notice, the supermicrocomputer must file a 10-K or submit a plan to Nasdaq to regain compliance within 60 days. This period expires on November 16th, so delisting procedures could begin as early as Monday, November 18th. That means the stock will be traded over-the-counter (OTC) and lose its place on the S&P 500 and S&P 500. A wide range of exchange traded funds (ETFs) that hold stocks.
At this time, it appears that the company is not on the verge of filing a 10-K statement as it has not yet appointed an auditor, and it is unclear how it plans to handle the delisting notice. In its preliminary first-quarter earnings report on Nov. 5, management said it intends to take the necessary steps to return to Nasdaq compliance as soon as possible. It seems unlikely that the company will file a 10-K in the coming days, so investors should expect the company to announce a plan to return to compliance, but what will that include? is unknown.
Supermicro also shared an update on its recently formed independent special committee on Nov. 5, stating that the audit committee will act independently from any influence from CEO Charles Lian and will He said there was no evidence of fraud or illegal activity.
The independent select committee also recommended a range of corrective actions and said a full report would be completed by the end of this week.
2. Nvidia Questions
Supermicro is clearly under pressure, and the company could face fines from the SEC or the Department of Justice, not to mention a financial recalculation that could further hurt its stock price. But the biggest risk to Super Micro Computer’s business appears to be the loss of its close relationship with Nvidia. (NVDA 0.34%)its most important partner.
NVIDIA has already distanced itself from Supermicro, with the artificial intelligence (AI) chip giant redirecting orders from Supermicro to other server companies, according to reports. Nvidia has not confirmed these reports, but assuming they are accurate, the move is likely due to concerns about the reputational risk associated with supermicrocomputers. Nvidia may also want to avoid operational issues at Supermicro as it launches its latest Blackwell chips.
Investors will receive an update from Nvidia on Wednesday, November 20th, when the company releases its third quarter financial results. This earnings report could shed some much-needed light on Supermicro’s situation.
What does it mean for supermicrocomputers?
Supermicrocomputers are running out of time to deal with various problems, and the stock price appears to be at a critical juncture. Investors could find out how viable that prospect is as early as next week.
If Nvidia fails to submit a plan to Nasdaq to remain compliant and indicates in its earnings report that Supermicro’s problems are more difficult than understood, the stock could be sent into a downward spiral that is difficult to reverse. There is sex.
That being said, while the company may also recover, the momentum and facts on the ground appear to be going in the opposite direction. The stock is too risky at the moment, but it’s worth keeping an eye on what happens with Supermicro in the coming weeks. If the company complies with Nasdaq regulations, reassures investors with the special committee’s findings, and clears NVIDIA’s earnings report without any bad news, the stock could see some light in the sun.
Still, it won’t be easy for the company to break past records and regain investor confidence.
