NEW YORK — The stock value of Super Micro Computer saw a significant decline of over 30% on Wednesday morning following the announcement that Ernst & Young (EY) had chosen to resign as its public accounting firm.
In a regulatory disclosure by Super Micro, the resignation occurred during EY’s audit efforts for the tech company’s latest fiscal year. Concerns were initially raised by EY in July regarding issues surrounding transparency and internal controls linked to financial reporting. This prompted the company’s board of directors to initiate a review process.
As the review unfolded, EY began to express doubts about whether Super Micro was genuinely committed to integrity and ethical practices, emphasizing the need for transparency and independent oversight beyond the influence of the CEO and other management figures.
On Wednesday, an inquiry was made to EY for their perspective on the situation. According to Super Micro’s filing, EY issued a resignation letter indicating its inability to rely on the assurances provided by the management and audit committee of the company. It concluded that it could no longer offer audit services “in accordance with applicable law or professional obligations.”
The letter of resignation was submitted last week, making this audit the very first the firm undertook for Super Micro.
Super Micro expressed disagreement with EY’s decision but acknowledged that the resignation was definitive. The company affirmed that it was taking EY’s concerns seriously and that the internal review is still in progress.
This resignation comes on the heels of a report released by Hindenburg Research just two months earlier, which alleged significant accounting irregularities at Super Micro, citing evident “accounting red flags” as well as undisclosed transactions. The report further accused Super Micro of reinstating executives who had been implicated in a scandal in 2018. At the time of the report in August, the company refrained from commenting on “rumors and speculation.”
In 2020, Super Micro faced charges from the Securities and Exchange Commission for improper accounting practices, which included prematurely recognizing revenue and understating expenses from at least the fiscal years 2015 to 2017. The company ended up paying a civil penalty of $17.5 million.
Despite the recent downturn, Super Micro had been benefiting from the ongoing growth in the artificial intelligence sector and, year to date, shares have still increased by about 20%. In its fourth-quarter report for August, the company announced revenues of $5.31 billion, representing an impressive rise of more than 143% compared to the $2.18 billion recorded in the same quarter of the previous year. Super Micro also announced plans to provide a “business update” next week regarding the commencement of the 2025 fiscal year.