By Deborah Mary Sophia and Aditya Soni
(Reuters) – AI server maker Super Micro Computer has delayed the filing of its annual report as it reviews “its internal controls over financial reporting,” sending shares down 25% in a brisk day of trading on Wednesday.
The delay comes a day after short-seller Hindenburg Research said it had taken a short position in the stock, alleging “accounting manipulation” by the company. Since peaking in mid-March, Super Micro shares have been in a tailspin, losing nearly two-thirds of their value amid a boom in AI stocks.
It was not immediately clear whether Super Micro’s decision was related to the Hindenburg report. The company declined to comment beyond its statement Wednesday when asked about Hindenburg’s allegations.
“It’s a case of ‘shoot first, ask questions later,'” said Thomas Hayes, chairman and managing member at Great Hill Capital, of the market reaction. “A delayed filing is a red flag — especially in light of the allegations. Time will tell who is right. But for now, investors seem to be assuming that where there’s smoke, there can be fire.”
Super Micro said Wednesday it was not updating results for the fiscal year and quarter ended June 30, which it announced earlier this month. The company reported a decline in quarterly margins due to rising server production costs and competitive pricing from rivals including Dell.
Super Micro has been a big winner in the generative AI boom, as companies bet on the technology needed to power applications like ChatGPT. The company’s value has skyrocketed since early 2023, rising from a valuation of around $4.4 billion to a peak of $67 billion in March.
But the ongoing rally in AI stocks has cooled since March as investors realized that returns on the companies’ heavy investments would be smaller than expected.
Hindenburg did not immediately respond to a request for comment on the delay.
The short seller on Tuesday pointed to evidence of undisclosed related-party transactions, export control violations and other issues. Hindenburg said it had conducted a three-month investigation, including interviews with former senior employees and court filings.
A review of tender documents by Reuters earlier this year found that Chinese parties acquired high-end Nvidia chips, which are used in server products from several companies including Super Micro, through resellers, despite a U.S. government crackdown on the sale of such technology to China.
Shares of Super Micro fell $148.65 to $399 on Wednesday, with more than 24 million shares changing hands, well above the 7.3 million-share average over the past 50 days, LSEG data showed.
Analysts at JP Morgan said in a note on Tuesday that the Hindenburg report contained “limited detail” about accounting manipulation but highlighted known areas of improvement in governance and transparency.
“We believe that the report largely lacks details about alleged misconduct at the company that would change the medium-term outlook. The report largely discusses the already known areas for improvement in corporate governance and transparency.”
Super Micro is the latest target of the short seller in conflict with billionaire investor Carl Icahn and India’s Gautam Adani.
Super Micro was sued by the U.S. securities regulator in 2020 for prematurely recognizing revenue and understating expenses. While the company did not admit or deny the SEC’s charges, it agreed to pay a $17.5 million fine.
(Reporting by Deborah Sophia in Bengaluru; Editing by Shilpi Majumdar, Sriraj Kalluvila and Shounak Dasgupta)
