Super Micro Computer (NASDAQ: SMCI) stock is seeing explosive gains in Tuesday’s trading. The company’s share price was up 30.7% as of 1:45 a.m. ET.
Supermicro stock is roaring higher today following news that the company has hired BDO as its new financial auditor and submitted a financial-results filing plan to Nasdaq. The auditor hiring and submission of the filing plan prevented the stock from being delisted from the Nasdaq exchange yesterday, removing a major short-term risk factor that had been worrying investors. But some big questions remain.
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Supermicro hiring BDO as its independent auditor is a significant positive development. BDO is the fifth-largest public accounting firm in the world and has a solid reputation in its industry. On the heels of recent controversies that have surrounded Supermicro and its accounting practices, bringing on a well-regarded auditor is good news.
In August, short-seller Hindenburg Research published a scathing bearish report on Supermicro that alleged repeated accounting violations. The next day, Supermicro announced that it was delaying the filing of its annual 10-K report.
In October, Ernst & Young (EY) resigned as the server specialist’s financial results auditor. EY stated that it had stepped back from the role because it no longer believed that it could rely on statements made by Supermicro’s management team and auditing committee. With BDO now on board, Supermicro can presumably move forward with the filing of its delayed 10-K reports. The move has also allowed Supermicro to submit a crucial financial filing plan.
If the filing plan had not been submitted, Supermicro’s stock would have been delisted from the Nasdaq exchange yesterday. In turn, the company’s shares would have started trading over the counter — which means less trading volume and less visibility for investors. Delisting would also mean that that the stock would be removed from major exchange traded funds (ETFs). But while immediate removal from the Nasdaq exchange has been averted, a potential delisting at a later date could still be on the table.
Additionally, an investigation into Supermicro by the Department of Justice is reportedly underway. Most coverage points to the reported investigation being tied to financial reporting issues, although some have speculated that the DoJ could also be looking into whether Supermicro violated export bans preventing the sale of advanced artificial intelligence (AI) processors to China. With so much uncertainty still surrounding the company, only investors with very high levels of risk tolerance should be considering the stock right now.
