SMCI stock price continues to drop: What is happening with Super Micro and EY?

Shares in Super Micro Computer, Inc. (Nasdaq: SMCI) have had a roller-coaster of a year, but yesterday the company’s stock price took one of its worst beatings in recent memory. SMCI shares fell over 32% after news that the server company’s auditor, Ernst & Young (EY), resigned last week. Here’s what you need to know about Super Micro Computer’s stock plunge.

What’s happened?

Yesterday shares in Super Micro Computer fell off a cliff—dropping over 32% to close at $33.07 per share. Today, the company’s stock price is down again. As of the time of this writing, SMCI shares are down another 4.5% in premarket trading.

The fall stems from yesterday’s news that Super Micro Computer’s auditor, accounting giant Ernst & Young, recently resigned. As CNBC reported yesterday, EY’s resignation was disclosed in a filing by Super Micro to the Securities and Exchange Commission (SEC). In its resignation letter, EY said it was “unwilling to be associated with the financial statements prepared by [Super Micro Computer’s] management.” according to the filing.

“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,” the letter also stated.

News of EY’s blunt resignation sent shivers down the spine of investors. It is the latest warning sign that the server maker may be facing severe problems.

August and September alarm bells

Back in September, the Wall Street Journal reported that the U.S. Department of Justice (DOJ) was investigating Super Micro Computer over alleged accounting irregularities.

This alleged investigation likely had to do with an August report from activist investment short-selling firm Hindenburg Research, which alleged that it had found “glaring accounting red flags” at Super Micro.

Hindenburg’s report along with rumors of the DOJ investigation already had investors rattled. Now that investor anxiety only seems to be compounded with news that Super Micro has lost its auditors, too.

All of this combined with the fact that Super Micro has not yet issued its financial statements for the current year and it’s no wonder the stock is taking a beating.

What has SMCI said about this?

Not much beyond what was already disclosed in its SEC filing. The company is planning a conference call and “business update” for its fiscal first quarter on November 5. We’ve reached out to Super Micro and EY for further comment and will update this post if we hear back.

SMCI’s roller-coaster year

Super Micro Computer’s main business is making servers that can run powerful artificial intelligence (AI) tasks. Super Micro Computer’s customers include chipmakers AMD and Intel and AI chip juggernaut Nvidia.

It’s no wonder, then, that SMCI stock has surged in the past few years. Once the AI boom started, SMCI shares surged at a commensurate rate. (SMCI shares split 10-for-1 at the end of September).

However, with the stock price plunge after Hindenburg’s August report and now the even steeper fall after news of Ernst & Young’s resignation, SMCI shares are at lows that have not been seen since December 2023.

Of course, if you’ve been a long-term SMCI investor, you’ve still seen some nice gains. As of yesterday’s close, SMCI shares are up over 1,400% over the past five years. But what happens now to the stock is anyone’s guess.