Super microcomputer (NASDAQ: SMCI) stocks see explosive gains in Tuesday’s trading. The company’s stock price was up 30.7% as of 1:45 a.m. ET.
Shares of Supermicro are rising today on news that the company has hired BDO as its new financial auditor and filed a financial results submission plan with Nasdaq. The hiring of an accountant and the filing of the filing plan prevented the stock from being delisted from the Nasdaq stock exchange yesterday, removing a key short-term risk factor that had concerned investors. But some big questions remain.
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Supermicro’s hiring of BDO as an independent auditor is an important positive development. BDO is the fifth largest accounting firm in the world and has a solid reputation in its industry. After the recent controversies surrounding Supermicro and its accounting practices, hiring a well-regarded accountant is good news.
In August, short seller Hindenburg Research published a scathing bearish report on Supermicro that repeatedly alleged accounting violations. The next day, Supermicro announced it was delaying the filing of its annual 10-K report.
In October, Ernst & Young (EY) resigned as the server specialist’s financial results auditor. EY stated that it had withdrawn from this role because it no longer believed it could rely on statements from Supermicro’s management team and audit committee. With BDO on board, Supermicro can presumably move forward with filing its delayed 10-K reports. This move also allowed Supermicro to submit a crucial financial filing plan.
Had the filing not been filed, Supermicro’s shares would have been delisted from the Nasdaq stock exchange yesterday. In turn, the company’s shares are said to have started trading over-the-counter, meaning less trading volume and less visibility for investors. The delisting would also mean the stock would be removed from major exchange-traded funds (ETFs). But while immediate delisting from the Nasdaq exchange has been averted, a possible delisting at a later date could still be on the table.
Additionally, Supermicro is reportedly under investigation by the Department of Justice. Most reporting indicates that the reported investigation is related to financial reporting issues, although some have speculated that the DoJ could also investigate whether Supermicro violated export bans that prevent sales of advanced artificial intelligence (AI) processors to China. With so much uncertainty still surrounding the company, only investors with a very high risk tolerance should be considering the stock at this time.
