Why Super Micro Computer Stock Crashed 28.6% This Week

Super Micro Computer (SMCI -2.48%) the stock has been hit hard in the last week of trading. The company’s share price ended the period down 28.6 percent from last Friday’s market close, according to data from S&P Global Market Intelligence.

On Tuesday, Hindenburg Research issued bearish coverage and claimed that Supermicro was a serial offender when it came to poor accounting practices. The short seller also raised other concerns about the strength of the business. Just one day later, the server specialist announced that it was delaying filing its annual 10-K report with the Securities and Exchange Commission (SEC).

Supermicro’s late filing added weight to Hindenburg’s report

With his brief memo, Hindenburg said he found evidence of new accounting manipulations by Supermicro. The report singled out $983.1 million in payments made over the past three years to private companies owned by the brothers of Supermicro CEO Charles Liang as suspicious. The company previously had significant accounting scandals in 2018 and 2020.

Hindenburg also said he believed the server specialist was guilty of evading US government sanctions. Supermicro high-performance rack servers use advanced processors from Nvidia which are banned from being exported to China, and reports suggested that the server company continued to sell these technologies to Chinese customers.

Just one day after Hindenburg’s report was released, Supermicro said it was delaying its 10-K filing to complete an evaluation of the design and operating effectiveness of its internal controls over financial reporting. The company did not provide a time window as to when the 10-K filing might be filed.

Wall Street doesn’t like Supermicro’s uncertain outlook

In a note published on Wednesday, Wells Fargo maintained an equal rating on Supermicro but lowered its price target for the stock from $650 per share to $375 per share. Company analysts cited uncertainty about the company’s revenue picture and past history with accounting issues as reasons for the target cut.

the next day, Bank of America (BofA) raised its rating on Supermicro and moved its status to stock under review. Citing the company’s financial review and internal oversight processes, BofA analysts said they failed to read Supermicro’s fundamentals.