(Bloomberg) – Super Micro Computer Inc. could face an early redemption of up to $1.725 billion of its bonds if the accounting issues lead to the company being delisted from the Nasdaq stock exchange.
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Holders of Super Micro’s $1.725 billion March 2029 convertible notes have the option to get their money back early if the company is taken private, according to bond documentation.
A delisting – seen as a real possibility after Super Micro missed the August deadline to file its annual financial report and its accountant resigned – would be a spectacular fall from grace for a company that has been a major beneficiary of the demand for powerful servers and other hardware to power artificial intelligence.
Super Micro declined to comment for this article. Chief Financial Officer David Weigand told analysts on a call Tuesday that the company has “longstanding and good relationships” with banks regarding its debt. “If necessary, we will file extensions or obtain waivers – we are not concerned about the company’s ability to access the capital markets,” he said.
The possibility of delisting increased after accountant Ernst & Young LLP resigned over concerns about governance and transparency. The company said Tuesday it is working on a compliance plan, which could push the deadline for submitting audited financials to February 2025.
For more: Super Micro could face delisting and removal from S&P 500 amid auditor troubles
Shares of the San Jose, California-based company have fallen 81% since a peak in March, wiping out about $53 billion in market value.
Underscoring the earlier enthusiasm for the company, the bonds sold in February had a 0% coupon, meaning the company pays no interest. It’s a throwback to the tech craze of the pandemic, when a host of highly hyped companies like Peloton Interactive Inc. and Snap Inc. sold similar interest-free banknotes.
The documentation under which the Super Micro bonds were sold states that there would be a cancellation and payment of the bonds assuming the shares are delisted from Nasdaq and not immediately relisted, retraded or relisted.
Super micro bonds were trading around 81 cents on the dollar on Wednesday, just above the 80 mark that investors consider “distressed.”
The company had about $2.1 billion in cash or equivalents at the end of September, the company said Tuesday. That bigger pile of money gives the country more options if it needs to review its debt, writes Matt Bryson, an analyst at Wedbush. Still, the possibility that this enormous amount of debt will have to be paid off early is “certainly a risk,” Bryson said in an interview.
