Supermicro stock soars 32% amid plan to avoid Nasdaq delisting

Key points

• Super Micro Computer filed plans with Nasdaq to avoid being delisted.

• It also hired a new outside auditor, BDO.

• Supermicro stock has been on a wild ride this year.

It was a good day for a technology company that has had its share of woes this year.

It has been a wild year for Super Micro Computer (NASDAQ: SMCI), more commonly known as Supermicro. While there have certainly been many more bad days than good in recent months, the stock was a top gainer on Tuesday, rising about 32% during the trading day to around $28 per share.

One of the catalysts was the news that the company had hired an independent outside auditor, BDO, to replace Ernst and Young, which had resigned on October 24 over concerns relating to the company’s governance, transparency, and internal control over financial reporting that it had first brought up in July.

This created more problems for Supermicro, as it informed the Securities and Exchange Commission last week that it would be delayed in filing its fiscal first quarter 10-Q earnings report for the quarter ended September 30. This was because it needed to find a new auditor, which it now has, and complete a report assessing the internal controls issues that EY brought up.

This was after the firm did not file an annual report, a 10-K, at the end of its fiscal year on June 30, due to these same issues.

Not filing a 10-K prompted the Nasdaq, on which Supermicro is listed, to send the company a noncompliance letter back in September. Nasdaq gave Supermicro 60 days to file the 10-K or submit a plan to do so or it would be delisted from the Nasdaq.

And that 60 days is up.

Supermicro files plan to avoid delisting

So, along with hiring the new auditor, Supermicro also came up with a compliance plan for Nasdaq to support its request for an extension to regain compliance and avoid being delisted.

In the compliance plan sent to Nasdaq, Supermicro officials said the company would complete its 10-K annual report for the year ended June 30, and its 10-Q earnings for the quarter ended September 30.

The company did not indicate when they would complete the reports in the press release. However, it said, pursuant to Nasdaq rules, Supermicro stock will remain listed pending Nasdaq’s review of the compliance plan.

Further, on the hiring of BDO International, a top five accounting firm, Supermicro President and CEO Charles Liang said: “This is an important next step to bring our financial statements current, an effort we are pursuing with both diligence and urgency.”

Rise and fall of Supermicro

This is just the latest twist in what has been a crazy year for Supermicro. This stock had been called the next NVIDIA (NASDAQ:NVDA) in some circles, as it makes servers for data centers that can handle AI applications.

It rode the AI boom to dizzying heights in the first few months of 2024, jumping more than 300% to some $1,200 per share in March.

The selloff began due to the fact that the stock had been ridiculously overvalued, with a P/E ratio that shot up to 79.

Then came a report from short seller and financial research firm Hindenburg Research that suggested “accounting red flags, evidence of undisclosed related party transactions, sanctions and export control failures, and customer issues.”

Around the same time, Supermicro failed to file its 10-K, and there were reports, initially by the Wall Street Journal, that it was under federal investigation.

Also of note, on October 1, the company executed a 10-for-one stock split which brought the share price down to around $42 per share, as it had been trading at around $420 per share before that.

So, today’s substantial move higher is the best day for Supermicro stock in a while. It got the price back to around $28 per share, essentially where it started in January – with a lot of volatility in between.

The good news is that the stock is dirt cheap with a P/E ratio of 10 and a forward P/E of 6. It also has huge earnings power, in a booming field, as we have seen. But investors should be extremely cautious until they see those missing reports.