Super Micro Computer, better known as Supermicro, is going through one of the most controversial periods in its more than 30-year history this week thanks to two major events. The first is news that the Department of Justice (DOJ) is reportedly investigating the AI server company’s accounting practices. The second is an upcoming stock split.
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And speaking of that stock, shares of Supermicro (Nasdaq:SMCI) fell more than 12% yesterday after news of the alleged DOJ investigation broke. Here’s what you need to know.
DOJ investigation
The most disturbing news for Supermicro this week came after the Wall Street Journal reported that the company was being investigated by the Justice Department for alleged accounting irregularities. Neither the DOJ nor Supermicro have confirmed the investigation, which is still in its early stages, according to the WSJ.
We’ve reached out to Supermicro for comment.
As for why the DOJ reportedly launched an investigation, it likely has to do with a Hindenburg Research report on Supermicro from late August. Hindenburg Research is an activist investment short-selling firm. In its report, the company claimed that over the course of its three-month investigation it found “glaring accounting red flags,” as well as sanctions and export control failures, and evidence of undisclosed related party transactions.
After Hindenburg’s report was published in late August, SMCI shares plummeted from a high of $557 on August 27 to a close of just above $443 on August 28 – a drop of about 20%.
And with yesterday’s news of a possible DOJ investigation, SMCI shares fell another 12%. At the time of writing, SMCI stock is currently trading about 1.6% lower in the premarket, around $396 per share.
SMCI stock split
While all this is happening, Supermicro’s stock will be split next week. The company announced the stock split in early August, nearly three weeks before Hindenburg’s report came out.
It’s a 10-for-1 split, meaning there will be ten times as many SMCI shares after the split as there were before the split, but each share will only be worth one-tenth of what it was before the split.
The split will take place after the closing bell on Monday, September 30. On Tuesday, October 1, SMCI shares will begin trading at their post-split price.
If a stock is just a few days away from being split, it’s usually quite easy to estimate what rough price the split shares might trade at. But with news of the possible DOJ investigation, SMCI stock could be volatile between now and then.
But let’s assume that SMCI stock is trading around its current price of around $400 on Monday; that would mean the split-adjusted price of SMCI shares would be about $40 each on Tuesday morning.
Supermicro’s AI server solutions are used by companies across industries such as healthcare, retail and manufacturing.
This post originally appeared on fastcompany.com
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