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Why Super Micro Computer Stock Was Falling Again Today

Source The Motley Fool

Shares of Super Micro Computer (NASDAQ: SMCI), best known for making artificial intelligence (AI) servers, were sliding for the third straight day today as the fallout from its auditor's resignation continued.

The stock closed down 10.5% and is now down 47% over the last three days since it reported the news.

Image source: Getty Images.

The financial drama continues

On Wednesday, the company said in a filing that its accounting firm, Ernst & Young (EY), had resigned. That news came after the company filed to delay its 10-K report and suffered a short-seller attack from Hindenberg Research.

Supermicro, as the company is also known, said it doesn't anticipate having to restate any of its quarterly reports. The company said that EY was in the middle of conducting its audit for the fiscal year (ended June 30, 2024), and it hasn't given a report on Supermicro's financial statements.

Disagreements between the two sides emerged over the course of EY's audit, including over Supermicro's adherence to internal control frameworks. EY told the company it resigned because it couldn't rely on management's representations and didn't want to be associated with the company's financial statements.

What it means for Supermicro

Management said it disagreed with EY's decision, but the plunge in the stock isn't surprising. It's highly unusual for an auditor to resign in the manner that EY did. That it comes after Supermicro's delay of its 10-K report and the attack from Hindenberg Research makes it even more suspicious.

The company is scheduled to release its fiscal first-quarter earnings after hours on Tuesday. If management doesn't give investors a satisfying explanation for EY's departure and clarity on when the 10-K will be completed, the stock will likely fall further.

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