Super microcomputer‘S (NASDAQ: SMCI) The stock price ended the daily session down 8.3%. Meanwhile, the S&P500 (SNPINDEX: ^GSPC) ended the day up 0.4%, and the Nasdaq Composite (NASDAQINDEX: ^IXIC) ended the session up 1.2%.
Supermicro shares lost ground today on news that the company may look to raise money through share sales or new debt. The company’s stock price also likely took a hit due to the delisting of shares Nasdaq-100 index.
After the market closed Friday, Bloomberg reported that Supermicro had hired Evercore to help the country tap into new sources of capital. The report stated that the server specialist was open to taking on new lines of credit and selling new shares to raise money. Through Evercore, Supermicro would approach private equity firms to gauge potential investment interest. Future new fundraising is said to be in its early stages.
If Supermicro raises money by selling more shares, it would have a dilutive impact on existing shareholders. Selling new shares means breaking the company’s capital structure into a larger number of pieces, with each piece accounting for a smaller slice of the overall pie.
Supermicro has taken steps to prepare its delayed 10-K report and prevent it from being removed from the facility Nasdaq fair. If the stock were to be delisted from the Nasdaq stock exchange, trading volume for the stock would drop dramatically – and the stock price would likely plummet. Adding more bearish pressure, the stock would be removed from exchange-traded funds (ETFs) that track the Nasdaq and other indices.
Supermicro has so far avoided this pitfall and says it must submit its 10-K report to the Securities and Exchange Commission.SEC) on February 25. But it has been unable to prevent its shares from being removed from a separate index.
The Nasdaq-100 is an index consisting of the 100 largest non-financial companies that trade on the Nasdaq stock exchange. Due to recent volatility, Supermicro was removed from the index and replaced by Palantir Technologies Today. As a result of the removal, Supermicro shares will also be removed from ETFs that track the index. That means shares are being sold from those funds, creating bearish valuation pressure on the stock.
While the delisting from the Nasdaq-100 doesn’t mean Supermicro will continue to decline in the long term, the stock’s replacement highlights recent challenges for the company that have yet to be resolved.