Ernst & Young pulls back: Super Micro Computer under pressure

The shares of Super Micro Computer are trading at USD 28 after falling another 15% on Thursday. The resignation of the auditor Ernst & Young has caused additional concern among investors, especially given lingering governance issues. Super Micro, which was included in the S&P 500 in March, now faces the challenge of submitting a compliance plan by November 16 to avoid being delisted from the Nasdaq stock exchange. This is a threatening situation for the company, which already received a non-compliance warning in September. Nasdaq requires a corrective policy; otherwise, the company could again face delisting—an experience that Super Micro went through five years ago. Analyst Vijay Rakesh of Mizuho Securities remains neutral in his assessment and sets a price target of USD 45 but expresses concerns about internal financial controls. Particularly, the independence of the board and adherence to governance standards are questionable, as was first revealed at the end of July. In Ernst & Young's resignation letter, it is noted that such issues make supporting the company's financial reports untenable. A special board committee has been established to address these challenges, but recent events led to EY's decision to distance itself from the financial reports prepared by the company’s management.