Super Micro Computer Just Made a Big Announcement and the Stock Is Soaring — Is It Finally Time to Buy?

This saga caused some investors to lose confidence, and heavy selling punished the stock price.

In mid-November, Supermicro announced it had hired a new auditor and submitted a Compliance Plan with the Nasdaq “to support its request for an extension of time to regain compliance with the Nasdaq continued listing requirements.”

The positive developments continued this week. In a regulatory filing that dropped on Monday, Supermicro announced the completion of an investigation and report by the “special committee” into the allegations. The committee, comprised of members of the audit committee, independent legal counsel, and a forensic accounting firm, found “no evidence of misconduct on the part of management or the board of directors” and that the “audit committee acted independently.” Perhaps most important for shareholders was the revelation that it expected no restatement of its previously issued financial results.

The special committee also found no evidence of violations of U.S. export laws. It also concluded that Supermicro’s existing related-party disclosures were sufficient. The committee did find, however, that there were certain process “lapses” in its internal controls. Namely the audit committee and the auditor were not informed about the rehiring or plans to rehire certain employees who had previously resigned from Supermicro, though the committee concluded that these rehires were the result of “reasonable business judgment.”

The wide-ranging investigation concluded with a number of recommendations, all of which Supermicro plans to adopt:

• Hire a new chief financial officer (CFO).

• Appoint a chief accounting officer to create an “additional layer of accounting standards and oversight.”

• Appoint a chief compliance officer, separate from its CFO.

• Appoint a general legal counsel and expand its legal department.

Investors cheered the results of the report, sending Supermicro stock higher.

This is certainly good news for Supermicro shareholders, but there’s still more to do. Management has embarked on a campaign to hire executives for the aforementioned positions, tighten up its internal controls to prevent future “lapses,” and put this dark chapter in the company’s history behind it.

As a Supermicro shareholder, I’m watching carefully as the company completes this process before making any decisions about the future. Investors should expect the extreme volatility that has marked to past few months to continue. Until Supermicro completes the recommend steps, I still won’t be buying the stock.

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Danny Vena has positions in Super Micro Computer. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Super Micro Computer Just Made a Big Announcement and the Stock Is Soaring — Is It Finally Time to Buy? was originally published by The Motley Fool