AI server manufacturer Supermicro Computer gets a chance to breathe!
In the night trading of the US stock market, the stock price of Supermicro Computer surged by nearly 50% at one point. As of the time of publication by the Chinese journalist of the securities firm, the company's stock price has still risen by 40%. Earlier, AMD announced that the company had submitted a compliance plan to NASDAQ and hired BDO (Deloitte Touche Tohmatsu) as its independent auditor.
Supermicro Computer was once a "AI giant stock". From early 2022 to March 2024, the stock price of Supermicro Computer rose more than 20 times in two years, with a market value approaching $70 billion at one point. However, since mid March, the stock price of Supermicro Computer has continued to adjust significantly. During this period, the company has not only been targeted by well-known short selling firm Hindenburg, but also experienced a series of problems such as the sudden resignation of auditor Ernst&Young and failure to submit financial reports on time. As of last Friday, the company's market value has shrunk to 10.8 billion US dollars.
Latest Actions of Ultra Micro Computer
On November 18th local time in the United States, Supermicro Computer announced that the audit committee of the company's board of directors has hired BDO USA as an independent auditor, effective immediately. Supermicro Computer stated that BDO is one of the top five accounting firms in the world, with a global network of over 115000 professionals and recognized as a leader in auditing and assurance.
Charles Liang, President and CEO of Supermicro Computer, said, "We are pleased to welcome BDO as the independent auditor of Supermicro Computer. BDO is a highly respected accounting firm with global capabilities. This is an important step in keeping our financial statements up-to-date, and we are working diligently and urgently to do so
In addition, Supermicro Computer announced that the company has submitted a compliance plan to the NASDAQ stock market to support its request for an extension of time to comply with NASDAQ's continued listing requirements. In the compliance plan, Supermicro Computer stated that the company will be able to submit annual reports up to June 30th and quarterly reports up to September 30th. And during the Nasdaq Compliance Review Program, Supermicro Computer will continue to be listed on NASDAQ.
If the plan of Supermicro Computer is accepted by the exchange, the new deadline for its documents may be postponed to February. It will continue to be listed on NASDAQ until a final decision is made on its compliance. If the plan is not approved, the company may appeal the decision.
Regarding this, Wedbush analyst Matt Bryson stated in a media interview that even if it's not one of the Big Four accounting firms, finding an auditor would be a "big step" for AMD. In terms of presenting the plan in front of Nasdaq, this is a positive step, at least from the company's perspective, hoping to submit financial reports and address these issues.
Once a major AI stock
Replacing auditors and developing a plan to comply with NASDAQ listing rules is the latest development for Supermicro Computer in the turbulent past few months. This move is also seen by the market as a positive step for the company to address its financial reporting issues and restore market confidence.
In the capital market, Supermicro Computer had previously taken advantage of the AI trend, with its stock price soaring more than 20 times from early 2022 to March this year, and its market value reaching nearly $70 billion at its peak. The partnership between AMD and Nvidia has lasted for over 20 years and has been one of the main beneficiaries of the artificial intelligence boom in the past two years. According to the financial report, as of the end of June 2024, the revenue of Supermicro Computer was $14.943 billion, a year-on-year increase of 109.77%, and the net profit was $1.2 billion, a year-on-year increase of 88.77%.
However, in recent months, this AI server manufacturer has been caught in a storm. At the end of August, well-known short selling firm Hindenburg accused AMD of "accounting manipulation" and other issues. Although AMD denied the allegations in Hindenburg's short selling report, claiming that the report contained "false or inaccurate" content about AMD, about a month later, the US Department of Justice launched a preliminary investigation into AMD. Subsequently, the company postponed its annual 10-K filing to the U.S. Securities and Exchange Commission. Last week, AMD also postponed submitting its latest quarterly 10-Q report to the US Securities and Exchange Commission.
At the end of October, the news of the resignation of the former auditor Ernst&Young due to concerns about the company's transparency and governance triggered a continuous plunge in the company's stock price. In 12 trading days, the stock price of Supermicro Computer fell by 63%, and its market value shrank to around 10 billion US dollars. As of the close of last Friday, the company's stock price has fallen by over 85% from its peak in March.
It is reported that Ernst&Young conveyed concerns about the company's governance, transparency, and communication integrity with Ernst&Young to the audit committee of the board of directors of Supermicro Computer at the end of July 2024, and stated that there are significant risks to the timely submission of Supermicro Computer's annual report. In addition, EY has raised doubts about the statements made by certain members of the company's management team and audit committee. Regarding the resignation letter submitted by Ernst&Young, Supermicro Computer expressed regret and dissent, believing that the investigation has not yet reached a conclusion. But the company will take the concerns raised by Ernst&Young seriously and carefully consider the investigation results and subsequent rectification suggestions.
The submission of the 10-K annual report requires the signature of the auditing agency, and the resignation of auditor Ernst&Young directly led to the difficulty in producing the annual report for Supermicro Computer. November 18th is the final deadline for Supermicro Computer to submit its delayed 2023 fiscal year 10-K annual report or compliance plan to meet Nasdaq listing requirements. If the submission is not made on time, it will result in a series of consequences: the company may be delisted, removed from the list of S&P 500 index constituent stocks, and required to repay $1.725 billion in bonds in advance. In the end, Supermicro submitted its compliance plan by the final deadline and found the auditing agency BDO to take over.
It is worth noting that Supermicro computers have undergone delisting and relisting processes before. In 2019, due to failure to submit the 10-K report and several quarterly reports on time, its stock was delisted from the NASDAQ exchange. However, the company received approval to rejoin the exchange in 2020 and paid a fine of $17.5 million to resolve an investigation by the US Securities and Exchange Commission. As part of the settlement agreement, AMD neither admitted nor denied the allegations made by regulatory authorities.
Although Supermicro Computer has found a new auditor BDO, there is still uncertainty as to whether the latter can complete the audit and provide a compliance opinion on schedule, and whether the 10-K annual report can be submitted on time. Whether Supermicro computers can successfully overcome difficulties and regain market trust remains to be seen.
In addition, AMD, which heavily relies on Nvidia GPU chips, has been accused of financial fraud, forcing Nvidia to make a certain degree of "cutting" and transfer some orders to other suppliers.
Everbright Securities recently stated that Supermicro computers are ready with solutions including GB200, NVL72, and B200 liquid cooled and air-cooled rack systems based on Blackwell, waiting for Blackwell chip supply. The supply of Blackwell chips will significantly affect the company's rack shipment volume and corresponding performance. According to Digitimes, Nvidia has intervened in restructuring the company's orders. If a large number of orders are transferred to other suppliers, it will have a negative impact on the company's revenue, and other potential server suppliers are expected to benefit.