Sketchy financials send Supermicro auditors running for the hills
Supermicro's stock fell over 30% after EY resigned as auditor due to financial reporting concerns. The company faces a whistleblower lawsuit, a Justice Department investigation, and risks Nasdaq delisting.
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Supermicro's stock plummeted over 30% after Ernst & Young (EY) resigned as its auditor, citing concerns about the reliability of the company's financial reporting. EY's resignation followed a whistleblower lawsuit alleging that Supermicro misreported revenues by prematurely booking sales and billing for incomplete orders. The U.S. Justice Department is reportedly investigating the company, which has not filed its 10-K annual report for over two months, risking delisting from Nasdaq. EY's resignation letter highlighted issues with governance and transparency, particularly regarding CEO Charles Liang's influence over the board. In response, Supermicro formed a special committee and engaged forensic accountants to review its internal controls. However, EY's findings raised further questions about the company's commitment to integrity. Supermicro disputes EY's reasons for resigning, asserting that the special committee's review is ongoing. The company is now seeking a new accounting firm, but its history of financial reporting issues, including a previous SEC settlement for accounting violations, complicates its situation.
- Supermicro's shares dropped over 30% following EY's resignation as auditor.
- Ernst & Young cited concerns about the reliability of Supermicro's financial reporting.
- The company faces a whistleblower lawsuit and a U.S. Justice Department investigation.
- Supermicro has not filed its 10-K report, risking delisting from Nasdaq.
- The firm disputes EY's resignation reasons and is seeking a new accounting firm.
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You could always tell when investors or potential customers were in town because the SMCI parking lot would suddenly have brightly colored sports cars parked right out front of the office, only to vanish shortly after until the next high profile meeting.
I always thought this was strange, but chalked it up to it being a cultural difference on how business is done in Asia vs the USA, but apparently not. GoPro used to do the same thing at their office in San Mateo back when the stock wasn't circling the drain, two Ferrari's parked right outside the front door as you walked into the building. Appearances can often be deceiving I guess.
[0] https://www.bloomberg.com/opinion/articles/2024-10-30/florid... or https://archive.is/SGhLe
For instance, they appear to care about security issues that publicly embarrass them or that affect huge customers of theirs, issues that'd've been trivial to fix, instead of fixing issues for the sake of fixing them. This kind of "sales" based security and their responses have forced me to encourage multiple companies to use other vendors.
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Super Micro Computer Inc. faces allegations of accounting manipulation, self-dealing, and sanctions evasion, with significant irregularities and client losses threatening its market position amid increasing competition.
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