Super Micro Computer's shares took a nosedive of more than 30% on Wednesday morning following the announcement that Ernst & Young (EY) had resigned as the company's public accounting firm. The resignation came during an audit for the tech company's most recent fiscal year, as disclosed in a regulatory filing from Super Micro.
EY raised concerns in July regarding transparency and internal control related to financial reporting, prompting Super Micro's board to initiate a review. Subsequent information obtained during this review led EY to question the company's commitment to integrity, ethical values, transparency, and oversight independent of top management.
EY's resignation letter, received last week according to the filing, stated that the firm could no longer rely on representations from Super Micro's management and audit committee, leading to the inability to continue providing audit services in compliance with legal and professional obligations.
While Super Micro disagreed with EY's decision to resign, it acknowledged the finality of the move and emphasized that it is taking the concerns raised seriously, with an ongoing review process in place.
This development comes on the heels of a report by Hindenburg Research alleging accounting manipulation at Super Micro, including undisclosed transactions and the rehiring of executives involved in a previous scandal. Super Micro had declined to comment on the report back in August.
In 2020, the Securities and Exchange Commission charged Super Micro with improper accounting practices, resulting in a $17.5 million civil penalty. Despite these challenges, Super Micro has seen a 20% increase in its shares year to date, buoyed by the company's involvement in the artificial intelligence sector.
Super Micro reported fourth-quarter revenue of $5.31 billion in August, marking a significant increase over the previous year. The company announced that it will provide a business update for the start of the 2025 fiscal year next week.
