Supermicro’s stock plummets 35% in one day as accounting firm resigns — storm brews after DOJ probe into manipulated finances

Supermicro stock tanked 35% today after accounting firm Ernst & Young resigned. The firm’s resignation, which cites unreliable management and possible law violations, comes one month after the Department of Justice investigated Supermicro for possible accounting manipulation and export violations. Supermicro’s stock value has been the lowest since January of this year.

Ernst & Young’s letter, cited in an SEC filing, reads, “We are resigning due to information that has recently come to our attention which has led us to no longer be able to rely on management’s and the Audit Committee’s representations and to be unwilling to be associated with the financial statements prepared by management, and after concluding we can no longer provide the Audit Services under applicable law or professional obligations.”

Ernst & Young also questioned Supermicro’s ability to act with “integrity and ethical values.” Ernst & Young’s resignation came while conducting the audit for the fiscal year ending June 30th, 2024. Supermicro rejected the accounting firm’s claims in its filing, saying there are no “reportable events” that would implicate Supermicro in wrongdoing.

Before the Ernst & Young news broke this morning, Supermicro was already in trouble with the law. The Department of Justice began an official investigation into the HPC/server vendor in September after Hindenburg Research accused Supermicro of manipulating its financial reports and violating U.S. export regulations to Russia and China.

Hindenburg’s August report, entitled “Supermicro: Fresh Evidence Of Accounting Manipulation, Sibling Self-Dealing And Sanctions Evasion At This AI High Flyer”, accused Supermicro of selling heavily to Russia in the wake of its invasion of Ukraine, corroborated by 3 months of interviews with former Supermicro employees. The Department of Justice’s investigation launched in response has included a prosecutor contacting individuals with potential knowledge of these practices, including information about a former employee who accused Supermicro of violating accounting rules.

Supermicro’s market valuation jumped from a steady $4.4 billion to $67 billion by March of this year, thanks to many high-profile AI server orders. The company is a major hardware partner of Elon Musk’s “Cortex” and “Colossus” AI-training supercomputers, providing servers and bespoke cooling solutions for over 150,000 GPUs and an unknown number of CPU/storage servers. Supermicro’s success, which may have come due to accounting fraud or illegal business activity, is now at serious risk after today’s stock disaster.