Shares of Super microcomputer (NASDAQ:SMCI)Best known for creating servers for artificial intelligence (AI), fell for the third day in a row today as the fallout from the accountant’s resignation continued.
The stock closed 10.5% lower and is now down 47% in the past three days since the news was reported.
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On Wednesday, the company announced in a filing that its accounting firm Ernst & Young (EY) had resigned. That news came after the company submitted a request to postpone the postponement 10-K report and faced a short-seller attack from Hindenberg Research.
Supermicro, as the company is also known, does not expect to have to revise its quarterly reports. The company said EY was conducting its audit for the fiscal year (ending June 30, 2024) and had not issued a report on Supermicro’s financial statements.
During the course of EY’s, disagreements between the two parties emerged auditincluding Supermicro’s compliance with internal control frameworks. EY told the company it was resigning because it could not rely on management’s statements and did not want to be associated with the company’s financial statements.
Management said it disagreed with EY’s decision, but the stock’s decline is not surprising. It is highly unusual for an accountant to resign in the way EY did. That it comes after Supermicro’s delay of its 10-K report and Hindenberg Research’s attack makes it even more suspicious.
The company is expected to report fiscal first-quarter earnings after business hours on Tuesday. If management doesn’t provide investors with a satisfactory explanation for EY’s departure and clarity on when the 10-K will be completed, the stock is likely to fall further.
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