Dramatic Price Drop: Super Micro in Conflict with Ernst & Young

Shares of Super Micro Computer suffered a drastic drop of over 30% on Wednesday morning. The reason: The renowned auditing firm Ernst & Young has withdrawn from its collaboration with the technology company. EY cited newly emerged information that has shaken confidence in the representations of the management and the audit committee, ultimately leading to a refusal to be associated with the financial reports prepared by management. The audit engagement was abandoned while the audit for Super Micro's fiscal year ending June 30, 2024, was still ongoing. In a report to the U.S. Securities and Exchange Commission (SEC), Super Micro stated that it disagreed with EY's decision. Although the company took EY's expressed concerns seriously, the review by a special committee has not yet been completed. Super Micro promised to carefully examine the committee's findings and any recommendations for action as soon as they are available. EY's withdrawal came two months after Hindenburg Research accused the Super Micro stock of violations such as "balance sheet manipulation" in a report. As a result, the former favorite in the AI data center business experienced a decline in its stock price over the past six months. Hindenburg's three-month investigation unearthed serious red flags regarding accounting, including undisclosed transactions with related parties, sanctions, export control violations, and customer issues. The revelations led to a delay in the submission of the annual report, which resulted in a further stock price drop of nearly 20% on August 28. The report for 2024 has not yet been submitted.