Super Micro Computer (SMCI), a retailer of high-performance servers and liquid-cooled AI racks, has remained in the spotlight ever since Hindenburg Research published its damning report against the company back in August, prompting SMCI to then delay the filing of the requisite annual report, presumably in a bid to undertake a comprehensive internal review. Now, however, Super Micro Computer appears perilously close to a maelstrom, given that its accounting firm has resigned, and the requisite annual report has yet to be filed.
New 8-K from $SMCI today
Down 25% on the news
On October 24, 2024, Ernst & Young LLP (“EY”) sent the members of the Audit Committee a letter of resignation as the Company’s registered public accounting firm
Never a good sign when the accounting firm resigns #SMCI pic.twitter.com/OYLifmPTol
— Wolf of My Street🏡 (@Ryan__Rigg) October 30, 2024
To wit, Ernst & Young (EY) has now sent a letter to Super Micro Computer's audit committee, tendering its resignation as the company's officially designated accounting firm.
Critically, EY resigned during the auditing process pertaining to Super Micro Computer's financial statements for the year that ended on the 30th of June, 2024:
"EY was engaged on March 15, 2023, to perform an audit for the Company’s fiscal year ending June 30, 2024, and has not issued any report on the Company’s financial statements or the Company’s internal control over financial reporting. EY resigned while conducting the audit for the Company’s fiscal year ended June 30, 2024, EY’s first audit on the Company’s behalf."
The letter goes on to note:
"After receiving additional information through the Review process, EY informed the Special Committee that the additional information EY received raised questions, including about whether the Company demonstrates a commitment to integrity and ethical values ..."
In what constitutes the letter's most damning part against Super Micro Computer, EY notes:
“We are resigning due to information that has recently come to our attention which has led us to no longer be able to rely on management's and the Audit Committee’s representations and to be unwilling to be associated with the financial statements prepared by management, and after concluding we can no longer provide the Audit Services in accordance with applicable law or professional obligations.”
For the benefit of those who might not be aware, Hindenburg Research had leveled hard-hitting allegations against Super Micro Computer back in August, asserting among other things that the company engages in distribution channel stuffing by pushing products to distributors based on artificially inflated demand forecasts, undertakes partial shipments to meet specific sales targets and inflate its total shipment count in the process, re-hired top executives responsible for "widespread accounting violations" that had resulted in a $17.5 million settlement with the SEC, and paid nearly a billion dollars over the past three years to non-arm's-length suppliers such as Ablecom and Compuware.
SMCI's fiscal year ended on the 30th of June, 2024, and, as such, it was required to file an annual report by the 30th of August. But, in the aftermath of Hindenburg's hard-hitting report, the firm delayed this requisite filing to undertake a comprehensive internal review.
For its part, Super Micro Computer has continued to assert throughout the past few weeks that it does not expect its ongoing internal review to result in "any material changes" in its fourth quarter or fiscal year 2024 financial results.
The company now faces the specter of a probable fine by the SEC for continuing to delay the filing of its annual report. What's more, Super Micro Computer was recently informed by the Nasdaq Exchange that it was "not in compliance" with the exchange's listing rules due to its failure to file the report in a timely manner.
Of course, today's development is a veritable indictment against SMCI's claims of having done nothing wrong. And, this development has a bearing on the broader narrative around NVIDIA/AI. Consider the fact that Super Micro Computer is NVIDIA's third-largest customer. What's more, SMCI's biggest client is NVIDIA, and its second-biggest client is an entity that is backed by NVIDIA.
At the time of writing, SMCI's shares are down a whopping 33 percent in today's morning trading session!
About the author: Writing is my one incontrovertible passion. Over the past six years, he has authored over 2,200 distinct articles on financial and tech-related topics, spanning nearly 1 million words. And he has been a member of Wcctech mobile team since 2025. As an alumnus of the University of Toronto, Rotman Commerce Program, I bring nuance, in-depth knowledge, and a unique perspective to every topic that I cover. When I'm not writing, I'm traveling the world, exploring hidden confectionaries and restaurants as an aspiring food connoisseur.
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