Super Micro Computer (SMCI.O) is navigating significant challenges, having received a letter from Nasdaq regarding its delayed financial reports, according to Reuters. CEO Charles Liang expressed optimism about avoiding delisting while preparing to submit necessary filings by February 25, 2024, following an auditing scandal. The once $67-billion company experienced a surge in stock value due to rising demand for AI infrastructure but now grapples with governance concerns revealed by Ernst & Young.
Super Micro Computer faces potential Nasdaq delisting
In a detailed review, Ernst & Young cited issues with Super Micro’s governance and internal controls over financial reporting earlier this year. This led the company’s board to initiate a special committee investigation. Although the committee concluded that Ernst & Young’s concerns lacked substantial backing, it found lapses in communication regarding the rehiring of former employees. Liang’s confidence was evident during the Reuters NEXT conference, where he assured stakeholders of timely disclosures. The completion of the necessary financial reports is critical as Super Micro recently received a notice indicating the implications of not meeting the reporting deadline.
The company’s struggles have not deterred some analysts, notably those from J.P. Morgan, who noted sustainable demand for Supermicro’s servers. While the firm maintains an underweight rating on the stock, it cites robust orders and plans to introduce new products in 2025 as positive indicators. However, J.P. Morgan’s one-year price target of $23 per share suggests a significant downside of approximately 45% relative to current valuation levels.
Despite these controversies, Super Micro claims to have sufficient working capital, projecting quarterly revenues between $5.5 billion and $6 billion. The ramp-up of Nvidia’s Blackwell processors for AI applications also presents potential growth opportunities. Yet, investor apprehension remains, primarily due to fluctuations in Super Micro’s stock following recent events.
As Super Micro transitions to BDO as its new auditor after Ernst & Young’s resignation in October, it has developed a plan for filing its delayed 10-K report. Nasdaq recently accepted this plan, offering a temporary reprieve from delisting. Attention now shifts to the anticipated disclosures in the upcoming filings, which will further shape the company’s financial outlook.
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