Why super micro computer stock fell again today

Actions of Super Micro Computer (NASDAQ: SMCI)best known for creating artificial intelligence (AI) servers, fell for a third day in a row today as the fallout from the resignation of its auditor continued.

The stock closed down 10.5% and is now down 47% in the past three days since reporting the news.

Image source: Getty Images.

The financial drama continues

On Wednesday, the company said in a filing that its accounting firm, Ernst & Young (EY), had resigned. This news came after the company requested to postpone 10-K report and suffered a short seller attack from Hindenberg Research.

Supermicro, as the company is also known, said it does not anticipate having to restate any of its quarterly reports. The company said EY is in the midst of its audit for the fiscal year (ended June 30, 2024) and has not given a report on Supermicro’s financial statements.

Disagreements between the two parties arose during the EY auditorincluding with respect to Supermicro’s compliance with internal control frameworks. EY told the company it resigned because it could not rely on management’s statements and did not want to be associated with the company’s financial statements.

What it means for Supermicro

Management said it disagreed with EY’s decision, but the drop in shares is not surprising. It is highly unusual for an auditor to resign in the way that EY did. That it comes after Supermicro’s delay in its 10-K report and the attack from Hindenberg Research makes it even more suspect.

The company is scheduled to release its first fiscal quarter GAINS after hours on Tuesday. Unless management provides investors with a satisfactory explanation for EY’s departure and clarity on when the 10-K will be completed, the stock will likely continue to decline.

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Jeremy Bowman has no position in any of the shares mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.