TLDR
- Super Micro Computer (NASDAQ: SMCI) has regained Nasdaq compliance by filing audited financial reports before the February 25 deadline, avoiding delisting.
- The company’s stock had plummeted 67% from September through mid-November following accounting concerns raised by Hindenburg Research.
- An independent review found no evidence of fraud but recommended strengthening the executive team.
- New auditor BDO gave an “adverse opinion” on internal financial controls, with the company now implementing improvements.
- The AI server manufacturer’s near-term investment outlook depends on risk tolerance, with the AI infrastructure market expected to grow from $200 billion to over $1 trillion by 2030.
Super Micro Computer (NASDAQ: SMCI) has successfully avoided its biggest risk – a potential Nasdaq delisting. The company filed its required audited financial reports by the February 25 deadline set by Nasdaq.
The AI server manufacturer had been facing delisting threats after missing standard filing deadlines for its 10-K annual report and 10-Q quarterly report. This development marks a major turning point for the company.
“The company has received correspondence from the Nasdaq staff that the company has regained compliance with the filing requirements, and the matter is now closed,” Supermicro confirmed in a statement.
This news comes after several challenging months for the tech company. SMCI stock had plummeted more than 67% from September through mid-November 2024.
The trouble began in late August when Hindenburg Research published a short report claiming “glaring accounting red flags” at the company. The situation worsened when Supermicro announced delays in filing required financial reports.
Adding to investor concerns, the company’s auditor resigned during this period. This chain of events halted what had been spectacular momentum for the stock.
Shares up nearly 800% over the previous three years
Prior to these challenges, Supermicro had been one of the early winners of the artificial intelligence boom. The company’s shares had gained nearly 800% over the previous three years.
The 30-year-old company specializes in making servers and equipment critical to AI data center operations. Customers value Supermicro’s ability to quickly customize equipment with the latest chip innovations from partners like Nvidia.
This competitive advantage had driven remarkable growth. At one point last year, Supermicro’s quarterly revenue surpassed what had been its full-year revenue as recently as 2021.
Since the accounting concerns emerged, Supermicro has taken several corrective steps. The company hired BDO as its new auditor and cooperated with an independent special committee review of its operations.
The committee found no evidence of wrongdoing or fraud at the company. However, it did recommend that Supermicro strengthen its executive team to better support the growing business.
Importantly for investors, Supermicro did not have to make any restatements to its financial reports from the earlier unaudited versions. This suggests the accounting issues were related to processes rather than actual numbers.
However, challenges remain. In the recent 10-K filing, BDO expressed an “adverse opinion” of Supermicro’s internal financial controls. This indicates ongoing concerns about the company’s financial reporting systems.
Supermicro acknowledges these weaknesses and has outlined plans for improvement. These include additional training for accounting staff, IT system upgrades, and new hiring initiatives.
The company’s business prospects still appear strong, especially considering the continued growth of the AI market. Industry analysts project the AI market will expand from approximately $200 billion today to over $1 trillion by 2030.
For investors, the decision on whether to buy Supermicro stock likely depends on risk tolerance. Cautious investors might wait for further evidence of improved internal controls and executive team strengthening.
More aggressive growth investors might see the current situation as an opportunity. If Supermicro successfully addresses its internal control issues, the stock could potentially recover from its recent losses.
The company’s core business of supplying critical infrastructure for AI data centers remains intact. With the delisting risk now removed, attention will turn to Supermicro’s operational performance in the coming quarters.
Stay Ahead of the Market with Benzinga Pro!
Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders:
- Breaking market-moving stories before they hit mainstream media
- Live audio squawk for hands-free market updates
- Advanced stock scanner to spot promising trades
- Expert trade ideas and on-demand support
