Supermicro issued a press release today, announcing that the independent special committee established by the company's board of directors has completed its review. The results did not show that Supermicro's management or audit committee has any major doubts about the integrity. Nor does it question Supermicro's commitment to ensuring the material accuracy of the company's financial statements. In addition, the Board of Directors has adopted all recommendations of the Special Committee, including the following measures:
- The company has begun searching for a new Chief Financial Officer (CFO). The current chief financial officer, David Weigand, will remain in office until his successor takes office.
- The company is accelerating its search for candidates for Chief Compliance Officer (CCO) and General Counsel.
- Appoint current Vice President of Finance Kenneth Cheung as the new Chief Accounting Officer (CAO). Kenneth Cheung is currently Vice President of Finance and Corporate Accounting at Supermicro, having previously served as Vice President of Operations.
Super Micro Computer Inc., a well-known American server manufacturer, suffered a double blow from financial difficulties and the rapid resignation of auditor Ernst & Young (EY). The stock price fell by more than 30% in a single day on October 30, the highest level since 2018. The biggest drop since the beginning of the year.
Supermicro mainly produces high-performance server products, which are widely used in data centers and artificial intelligence (AI) computing needs. The product is equipped with a high-end NVIDIA chip, which has powerful computing capabilities and is suitable for the operation of generative AI applications such as ChatGPT. With the rapid development of AI technology, Supermicro's market value was once as high as US$67 billion.
Now, due to successive controversies, the stock price has collapsed. What happened to Supermicro?
Short-seller accusations, Department of Justice investigation, crackdown on Supermicro's image
This series of controversies began when Supermicro was accused of accounting fraud by short-selling company Hindenburg Research in August this year, causing the stock price to fall by about 12% in a single day.
According to Hindenburg's report, it said that after multiple investigations, it found signs of false financial reports from Supermicro, and accused Supermicro of failing to truthfully disclose relevant transactions and improper export controls. The United States has strictly controlled the export of information technology to China in recent years, but Reuters pointed out that Chinese companies have obtained server products with high-end NVIDIA chips embedded in them from several companies, including Supermicro, through dealers.
After Hindenburg published his report, the U.S. Department of Justice quickly intervened in the investigation. According to the Wall Street Journal, the investigation stemmed from accusations by a former employee that Supermicro had irregularities in its accounting practices. This is not the first time that Supermicro has been questioned by the outside world due to financial problems. In 2020, Supermicro was fined US$17.5 million by the U.S. Securities and Exchange Commission (SEC) due to accounting problems.
Ernst & Young cuts off and releases rare stern open letter: refuses to endorse Supermicro's financial report
Although Supermicro denied Hindenburg's accusations, it immediately announced a delay in submitting its annual financial report on the grounds that it needed to "evaluate internal controls over financial reporting." This triggered market concerns about Supermicro's corporate governance and financial transparency. To make matters worse, the company responsible for the audit Ernst & Young announced the resignation over Supermicro's "corporate governance and transparency issues."
Ernst & Young stated in a public resignation letter that due to new information obtained during the audit process, it can no longer trust the statements of Supermicro's management and audit committee, and refuses to be involved in Supermicro's financial reports. This resignation letter was extremely worded and attracted market attention.
Hindenburg founder Nathan Anderson pointed out on X (Twitter) that Ernst & Young's resignation letter was one of the harshest resignation letters he had ever seen. Bloomberg analyst Woo Jin Ho said Ernst & Young's resignation deepens market doubts about the credibility of Supermicro's financial reports and indicates that the company may need to further strengthen its corporate governance structure and even adjust its leadership.
Supermicro is an important player in the AI server market. Driven by the wave of artificial intelligence, its market value once soared from US$4.4 billion in early 2024 to US$67 billion. However, Supermicro's future is full of uncertainty as financial problems emerge, causing sharp fluctuations in the stock price. How to restore market confidence and rebuild transparent corporate governance has become an important issue that Supermicro must solve at the moment.
Source: Reuters, Bloomberg, The Wall Street Journal
