Why is Super Micro Computer stock trading lower on Wednesday?

On November 13, 2024By Littum

Super Micro Computer, Inc. (NASDAQ:SMCI) stock is trading lower on Wednesday after it announced that it was unable to file its first quarter 2025 tax Form 10-Q for the quarter ended September 30, 2024 due to excessive effort and cost.

The company is also due to file its 2024 Form 10-K for the fiscal year ending June 30, 2024.

Following concerns from its former independent auditing firm, the company’s board formed a special committee to investigate internal controls.

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Although the committee has completed its initial review, more time is required to complete its work. The company chooses a new independent auditor to replace the resigned audit firm.

Super Micro requires additional time to engage the new auditor, assess the effectiveness of internal control per June 30, 2024 and complete the audits for the 2024 Form 10-K and first quarter 2025 Form 10-Q. The quarterly report cannot be completed before the annual report is completed and submitted.

Super micro computer risks delisting after its auditor, Ernst & Young, resigned over alleged accounting problems and possible export control violations. If the company is delisted, it may be required to repay up to $1.725 billion in convertible bonds early.

The bond agreement allows holders of Super Micro’s $1.725 billion in notes due March 2029 to demand repayment if Nasdaq delists the shares and they are not quickly relisted or traded. To avoid delisting, Super Micro must file its annual report with the SEC by mid-November.

Super Micro expects turnover in the first quarter of $5.9 billion – $6 billion, down from its previous guidance of $6 billion – $7 billion.

The company expects adjusted EPS of 75 cents-76 cents compared to its previous guidance of 67 cents-83 cents.

Super Micro expects revenue of $5.5 billion-$6.1 billion in the second quarter. The company expects adjusted EPS for the second quarter of 56 cents-65 cents.

Analysts be careful with Super Micro Computer despite the company’s positive update from its special committee investigation. The concerns stem from the ongoing search for a new auditor and delayed SEC filings.

JPMorgan downgraded Super Micro to Underweight, citing risks from the lack of clarity on Ernst & Young’s resignation and corporate governance issues. The firm lowered its price target to $23, highlighting transparency issues and uncertainty around financial reporting.

Needham also flagged the unresolved auditor situation as a material concern and suspended its rating until Super Micro files its 10-K and appoints a new auditor.