Since late August, Super Micro Computer, Inc. a difficult time behind us.
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The company, also known as Supermicro, is one of America’s largest manufacturers of high-end servers, like the kind needed to power AI tasks. The stock market recently took a hit when activist short-selling firm Hindenburg Research released a report claiming there were “glaring accounting red flags” at the company. After Hindenburg’s report went public, shares of Super Micro Computer (NASDAQ: SMCI) fell 20% to $443 per share.
Last week, news of a possible Department of Justice (DOJ) investigation into the company, possibly due to the aforementioned “flanking accounting red flags,” sent shares down another 12% to below $400 per share. (Supermicro did not respond to our request for comment on the rumor investigation, which was reported by Bloomberg.)
But today, SMCI’s share price is even lower, with shares now trading around $42 at the time of writing. But if you are an SMCI investor, don’t panic. The stock hasn’t crashed. It’s just split. Here’s what you need to know:
SMCI 10-for-1 stock split
At market close yesterday, SMCI’s stock price was $416.40 per share. But when the markets opened this morning, the stock price was trading around $42 per share. The huge “drop” comes because, after yesterday’s closing bell, SMCI stock was split 10-to-1.
That means for every SMCI share that existed yesterday, nine more shares exist today. But because there are now a total of 10 shares for every share of SMCI stock that existed yesterday, this means that each share is worth one-tenth of the price it was yesterday – hence why SMCI’s share price is so “low” today.
Is Super Micro Computer worth more or less today than yesterday?
Without taking into account any gains or losses in SMCI stock during today’s normal trading session, Super Micro Computer is worth essentially the same today as it was yesterday.
Creating more shares in a company does not inherently make it more valuable, because the greater availability of shares makes each share less valuable at a proportionate rate.
Yesterday, Super Micro Computer’s market cap (the total value of all its shares) was worth about $243 billion – and today its market cap is about the same as at the time of this writing.
What these stocks will do in the future remains to be seen. But SMCI stock could be in for a bumpy ride if the DOJ does indeed come out to confirm that it is investigating Super Micro Computer.
So stock splits are normal, right?
Correct. A few relatively recent examples are Nvidia, Walmart, Broadcom and Chipotle. Companies often split their shares because the lower share price is seen as more attractive to retailers and employees.
This post originally appeared on fastcompany.com
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