Super Micro Computer Struggles with Massive Stock Market Loss after EY Withdrawal

Super Micro Computer had to endure a dramatic drop in its stock price by over 14% following the unexpected withdrawal of the renowned auditing firm Ernst & Young, wiping out the entire year's gains. The background to this is a report filed earlier this week, in which EY announced its resignation during the audit of the company. Following this event, the financial analysis firm Argus downgraded the server manufacturer from "Buy" to "Hold" and refrained from providing a new price target forecast. At the same time, analysts from Needham and Wells Fargo suspended their coverage of the company. Already in August, Super Micro Computer came under scrutiny when Hindenburg Research accused the AI pioneer of "financial manipulation." The U.S. Department of Justice subsequently launched investigations. "The loss of the auditor and the Department of Justice investigations mean that the stock is no longer trading on a fundamental basis," commented Argus analyst Jim Kelleher. He indicated that the company could be put back on the buy list once a new auditor is engaged, reporting obligations are met, and all legal matters are resolved. Already on Wednesday, the stock recorded a dramatic drop of about 33% after it was announced that EY had discontinued the ongoing audit for the fiscal year ending June 30, 2024. In its resignation letter, EY stated that new information had come to their attention, making it impossible for them to rely on the management's and audit committee's representations or associate with the financial statements prepared by the company's management. Super Micro Computer stated in a declaration that it disagrees with EY's assessment and is working urgently to find new auditors. Despite the accounting turmoil since late summer, the stock had still been up as of Thursday. For the current year, the stock has now fallen by over 1%.