Super Micro Analyst Suspends Rating Over Governance, Accounting Issues

Anusuya Lahiri

November 02, 2024

Super Micro Computer, Inc (NASDAQ:SMCI) stock continued to fall on Thursday after Rosenblatt analyst Hans Mosesmann suspended his rating on the artificial intelligence server company, citing governance and accounting concerns following Ernst & Young’s resignation as the company’s auditor.

Mosesmann noted that Ernst & Young resigned as the company’s registered public accounting firm on Oct. 24, due to concerns regarding governance, transparency, and completeness of communications from Super Micro to Ernst & Young and matters regarding internal control of financial reporting.

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Super Micro is in the process of finding a new accounting firm and does not expect to restate any quarterly financials for fiscal 2024 or previous fiscal years.

In early September, Super Micro’s management postponed its 10K filing, stating they did not anticipate any material adjustments to the fiscal quarter or fiscal year ending in June, a stance reiterated in their 8-K filing, the analyst noted Additionally, Super Micro appointed a Special Committee to review its internal controls.

Management disagreed with Ernst & Young’s decision to resign before the review’s completion, suggesting the departure may align with staff reductions amid declining demand, potentially signaling a shift away from higher-risk projects.

Mosesmann anticipates further management updates during the first-quarter fiscal 2025 earnings call scheduled for Nov. 5. Given current uncertainties around Super Micro’s financials, the analyst suspended his rating, price target, and estimates until a clear outcome allows for a definitive recommendation.

Also on Thursday, Argus Research analyst Jim Kelleher also downgraded Super Micro from Buy to Hold.

In August, Hindenburg published a short report accusing Super Micro of accounting manipulation, self-dealing with related parties, and evading sanctions.

The report draws on findings from litigation records, company documents, and interviews with former senior employees.

Price Action: SMCI stock is down 10.5% at $29.58 at last check Thursday.

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