Super Micro's Shares experience another Fall. Could the Downturn Reach its Peak?
The situation for Super Micro Computer (SMCI 1.97%) has been deteriorating over the past two months, starting with a short-seller attack leading to a delay in their 10-K filing, a Department of Justice investigation, and recently, the departure of Ernst & Young as their auditor.
Yesterday, adding to their woes, they announced preliminary fiscal first-quarter earnings that are causing their stock to tumble. Management also disclosed that they're still uncertain about when they can submit their 10-K report.
As a result, the stock dropped 24.4% at 10:56 a.m. ET, following the news.
Is Super Micro Computer Reliable?
Instead of delivering official audited results for fiscal 2024, the company presented preliminary, unaudited results. Investors are still awaiting the formal report.
The company reported preliminary revenue of $5.9 billion to $6 billion for the quarter, which fell short of the anticipated range of $6 billion to $7 billion. However, earnings per share of $0.75 to $0.76 were in line with their projections.
The guidance for the second quarter was also weak, predicting revenue of $5.5 billion to $6.1 billion. The company's Independent Special Committee announced that no illegal activities or misconduct by management or the board of directors were found. They plan to propose corrective actions for internal governance and are expected to release a comprehensive report within the next week.
Management typically avoided discussing the challenges they're currently facing with their financial reporting.
Can the Stock Rebound?
At present, it's not the company's quarterly numbers that are a concern. Management needs to restore investor trust, hire a new auditor, and finalize the 10-K report. Supermicro also faces a potential delisting warning from the Nasdaq due to the delay in the 10-K filing.
If Supermicro fails to address its accounting scandal, there's a chance the stock will continue to decline. At the moment, it appears more likely that things will worsen before they improve.
Amidst these financial challenges, Super Micro Computer might need to seek additional funding through investments or loans to sustain their operations.
The uncertainty surrounding the company's financial reporting and the prospect of delisting from the Nasdaq could deter potential investors, making it harder to secure financing.
