Super Micro Computer ( SMCI ) stock fell 2% early Tuesday following a report from short seller Hindenburg Research claim, among other things“accounting manipulation” at the AI high-flyer. Super Micro shares were down as much as 8% in premarket trading after headlines about the Hindenburg report.
Hindenburg Research said the three-month investigation revealed “glaring accounting red flags, evidence of undisclosed related party transactions, sanctions and export control failures, and customer issues.” The company announced on Tuesday that it had taken a short position in Super Micro.
Yahoo Finance reached out to Super Micro and had not heard back from the company at the time of publication.
The maker of data center servers and management software caught investors’ attention this year as it rode the AI wave. The company buys components from AI chip maker Nvidia (NVDA).
Super Micro shares rose from $290 in early January to $1,200 in March. The stock is down about 50% from the March pea, but is still up 90% this year. The company recently announced a 10-for-1 stock split, effective October 1.
In his report, Hindenburg alleged that despite a $17.5 million settlement in August 2020 with the SEC following an investigation for “widespread accounting violations,” Super Micro’s business practices did not improve and that senior executives who were at the center of the scandal left, were later rehired.
The report quotes a former salesperson as saying, “Almost all of them are back. Almost all of the people released were the cause of this crime.”
The report states: “Even after the SEC settlement, pressure to meet quotas caused sellers to fill the channel with distributors by using ‘partial shipments’ or shipping defective products around the end of the quarter , as our interviews with former employees and customers show.”
“On balance, we believe Super Micro is a serial repeat offender,” Hindenburg said in his report.
“It benefited as an early mover, but still faces significant accounting, governance and compliance issues and offers an inferior product and service that is now being eroded by more credible competition.”
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance