Super Micro stock plunges after company delays annual report following short-seller report

 

Super Micro Computer (SMCI) saw its stock plummet by as much as 26% on Wednesday following the company's announcement of a delay in filing its annual report for the fiscal year ending June 30.

This news came just a day after short seller Hindenburg Research accused the company of "accounting manipulation" among other issues.

According to Super Micro, "SMCI is unable to file its Annual Report within the prescribed time period without unreasonable effort or expense." The company added that more time is needed for management to finalize its assessment of the effectiveness of internal controls over financial reporting as of June 30, 2024.

Earlier this year, Super Micro’s shares surged from $290 in January to around $1,200 by March. The stock was subsequently included in both the S&P 500 and Nasdaq 100 indices. However, it has since fallen more than 60% from its March peak, though it remains up 50% year-to-date. The company also recently announced a 10-for-1 stock split effective October 1.

The stock experienced a slight 2% decline on Tuesday after Hindenburg’s report highlighted "glaring accounting red flags," undisclosed related party transactions, and other issues. Hindenburg also revealed it had taken a short position in Super Micro.

The company, known for its data center servers and management software, had attracted significant investor interest due to its involvement in the AI sector, including purchases from AI chipmaker Nvidia.

Short sellers have seen substantial gains from the stock’s drop. On Wednesday alone, they earned over $1.07 billion in mark-to-market profits, according to S3 Partners. S3 Partners’ head of predictive analytics, Ihor Dusaniwsky, noted that short sellers began building their positions when the stock was around $900 in April and accelerated their activity since mid-July.

"Short sellers are up more than $2.85 billion in mark-to-market profits since July 15," Dusaniwsky told Yahoo Finance. He added that while further short selling is expected as the stock price continues to drop, there could be a surge of buy-to-covers once the stock stabilizes and short sellers look to lock in their profits.

In its report, Hindenburg also claimed that despite a $17.5 million settlement with the SEC in August 2020 over "widespread accounting violations," there was no significant improvement in Super Micro's practices, and some senior executives involved in the scandal were later rehired.