Super Micro Computer stock (SMCI) cratered Wednesday, falling over 32% after a filing revealed accounting firm Ernst & Young (EY) has resigned from its relationship with the tech company.
In the resignation letter, EY said, “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 and to be unwilling to be associated with the financial statements prepared by management, and after concluding we can no longer provide the Audit Services in accordance with applicable law or professional obligations.”
EY quit while conducting the audit for Super Micro’s fiscal year that ended on June 30, 2024. In Wednesday’s 8-K SEC filing, Super Micro said in a statement it “disagrees” with EY’s decision and is “working diligently to select new auditors.”
“The Company does not expect that a resolution of the matters raised by E&Y or those under consideration by the previously announced Special Committee of the Board will result in any restatements of its quarterly financial results for the fiscal year ended June 30, 2024, or for prior fiscal years,” Super Micro said in a statement provided to Yahoo Finance.
Super Micro has announced it will provide a first quarter business update on Tuesday, Nov. 5, which is Election Day in the US.
EY’s resignation comes two months after a short report from Hindenburg Research alleged, among other things, “accounting manipulation” at the artificial intelligence highflier.
After rallying earlier in the year as investors cheered SMCI’s prospects in the AI data center space, the stock is now down over the past six months.
In August, Hindenburg said its three-month investigation “found glaring accounting red flags, evidence of undisclosed related party transactions, sanctions and export control failures, and customer issues.” The firm also disclosed it had taken a short position in Super Micro.
After that report, Super Micro delayed the filing of its annual report, which sent the stock nearly 20% lower on Aug. 28. Per Super Micro’s SEC filing page, the company still hasn’t filed its annual report for 2024.
In September, the Wall Street Journal reported the US Department of Justice is investigating Super Micro Computer. The Journal reported the probe was in an “early stage,” citing people familiar with the matter. Additionally, the Journal said a prosecutor at the US attorney’s office in San Francisco had asked for information regarding a former employee who was accused of accounting violations.