Super microcomputer (NASDAQ: SMCI) Stocks had a big November and started December with a bang. It’s been a somewhat hectic time for the provider of artificial intelligence (AI) server stacks and cooling systems. But if all the concerns turn out to have less impact than many investors have feared, there could also be a lot more upside potential for these stocks.
Supermicro shares’ big recovery started with a 12.1% gain in the month of November, according to data from S&P global market information. But it didn’t stop there. The stock is up another 30% on the first two trading days of December alone. And maybe it’s not done yet.
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However, this huge move did not mean that the stock had fully recovered from the panic selling that preceded it. Although there is a recovery, interest rates are still down more than 45% in the past six months. Here’s a quick summary of why the stock plummeted:
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Short-selling firm Hindenburg Research released a report in late August accusing Supermicro’s management of accounting manipulation, failed export controls and other corporate culture issues.
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Supermicro immediately followed this with a delay in filing its 10-K annual report for fiscal 2024 ending June 30, 2024.
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The company received a letter of non-compliance from the Nasdaq Stock Market.
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Supermicro’s accountant resigned in late October after raising concerns months earlier.
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Supermicro released the first results of an independent special committee on November 5, which found that there is “no evidence of fraud or misconduct on the part of management or the board of directors.”
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The company filed a compliance plan with Nasdaq and appointed a new auditor on November 18.
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The special committee released details of its completed investigation on December 2, supporting the preliminary findings, and noted that no restatement of previously reported financial results is expected.
The result was a sense of relief among investors, sending buyers back into the heavily shorted stocks. And that momentum may not be over yet. According to MarketWatch, about 17.5% of the company’s stock price had been shorted as of mid-November. But investors need to realize that the ongoing short squeeze will end, and the focus will have to return to the company itself.
The company plans to adopt several of the special committee’s recommendations. This includes hiring a new Chief Financial Officer (CFO), a Chief Compliance Officer and a General Counsel. It will also initiate a program of continuous improvements in its financial controls and compliance processes.
