Shares of Supermicro Computer (SMCI) plunged 19% on Wednesday after the company said it would delay filing its annual report for the fiscal year ending June 30.
The announcement came a day after short-seller Hindenburg Research alleged “accounting manipulation” at the leading artificial intelligence company.
“SMCI is not able to file its annual report within the required time frame without undue effort or expense,” the company said in a statement. “Additional time is required for SMCI’s management to complete its evaluation of the design and operating effectiveness of its internal control over financial reporting as of June 30, 2024.”
Supermicro’s stock price has soared from $290 in early January to around $1,200 when it was added to the S&P 500 Index (^GSPC) in March, and to the Nasdaq 100 Index (^NDX) in July.
Supermicro shares are down more than 60% from their March peak but up 50% this year. The company recently announced a 10-for-1 stock split effective Oct. 1.
The company’s shares fell about 2% on Tuesday after Hindenburg said a three-month investigation “found significant accounting deficiencies, evidence of undisclosed related-party transactions, sanctions and export control deficiencies, and customer issues.” The company also revealed that it had taken a short position in Supermicro.
The data center server and management software maker has been riding the AI wave to attract investor attention this year, buying components from AI chipmaker Nvidia (NVDA).
Short sellers made huge profits from the sudden drop in stock prices.
Supermicro’s shares fell on Wednesday, helping short sellers make more than $840 million in mark-to-market gains, according to data from S3 Partners.
“SMCI short sellers have been building positions since SMCI was in the $900 range in April, but have been buying in earnest since mid-July,” Igor Dusaniwski, head of forecasting analytics at S3 Partners, told Yahoo Finance on Wednesday.
“As SMCI’s share price continues to decline, we expect the short selling to continue, but be wary of heavy buybacks once the stock stabilizes and short sellers look to realize their recent huge gains,” Dusaniwski added.
On Wednesday, analysts at CFRA downgraded the stock to hold from buy following Hindenburg Research’s assertions.
“While we believe the evidence presented does not conclusively prove significant accounting fraud or verifiable sanctions evasion, SMCI’s delay in filing its 10-K and potential reputational damage raises concerns,” wrote Shreya Gheewala, senior equity analyst at CFRA Research.
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Hindenburg alleged in its report that despite a $17.5 million settlement in August 2020 following an SEC investigation into “widespread accounting violations,” Supermicro’s business practices did not improve and that senior executives who left amid the scandal were later rehired.
“Almost everyone is back. Almost everyone who was fired that was responsible for this misconduct is back,” the report quoted a former salesperson as saying.
“Even after the SEC settlement, interviews with former employees and customers revealed that pressure to meet quotas forced sales representatives to use ‘split shipments’ and shipments of defective product around quarter end to stuff their sales channels,” Hindenburg said in the report.
“Ultimately, we believe Supermicro is a repeat offender.”
Inés Ferré is a senior business reporter at Yahoo Finance. Follow her on X. Follow.
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