Today's decline in Super Micro Computer's share price can be attributed to...
Super Micro Computer (SMCI -3.90%) saw a dip in trading on Wednesday after the company announced it wouldn't be able to submit its quarterly 10-Q report on time. The stock closed the day down 6.3%.
The tech company disclosed to the Securities and Exchange Commission (SEC) that it wouldn't meet the deadline for the 10-Q report without expending an excessive amount of effort or resources. The missed filing deadline may be attributed to Ernst & Young (EY) withdrawing as Supermicro's auditor in October. The stock has declined by 57.5% over the past month, and further sell-offs could persist unless Supermicro manages to expedite its financial filings and assuage investors' concerns.
More hardships for Supermicro shareholders
EY announced its departure as Supermicro's financial auditor in October, citing "new information that has surfaced, making it impossible for us to rely on management's and the Audit Committee's representations and to ultimately endorse the financial statements prepared by management." EY's decision came after a critical report published by short-seller Hindenburg Research in August, which leveled allegations of accounting improprieties against the company.
Given that Supermicro hasn't confirmed a new auditor, it's unsurprising that the company will miss its 10-Q filing deadline. Failing to meet the quarterly filing deadline is undeniably bearish news, but it's not the only pressing filing concern at the moment.
In order to remain in compliance with the SEC and continue trading on major exchanges, companies need to submit regular financial reports. Supermicro has yet to file its annual 10-K report for its last fiscal year, which concluded on June 30. Delayed 10-K filing poses a risk of delisting Supermicro from the Nasdaq exchange.
Has Supermicro's stock hit bottom?
Supermicro released unaudited results for the first quarter of its current fiscal year, which concluded on September 30, on November 5. The company anticipates sales to range between $5.9 billion and $6 billion, which falls short of its earlier forecast of revenue ranging between $6 billion and $7 billion.
The situation is further complicated because investors might have reservations about the preliminary figures since they've not been audited yet. Despite earlier gains driven by artificial intelligence (AI) trends, Supermicro's stock has dropped approximately 29% in 2024's trading, and there's a possibility the decline hasn't peaked yet.
In order to continue trading on major exchanges, companies must submit regular financial reports. If Supermicro does get delisted from the Nasdaq, the stock will continue trading on over-the-counter exchanges – but such an event would undoubtedly add new bearish pressures.
Investors may be wary about injecting more money into Supermicro due to the ongoing financial uncertainties. The company's inability to submit its annual 10-K report and the potential risk of delisting from the Nasdaq could deter investors who rely on regular financial reports for making informed decisions in the finance sector.
Given the losses Supermicro has experienced so far, some investors might be considering a strategic withdrawal of their investments until the company begins showing signs of financial stability and resumes regular financial reporting.
