Super Micro’s stock took a significant hit, dropping by 33% after the company announced that its auditor, Ernst & Young, had resigned due to ongoing disagreements regarding governance and board independence. Ernst & Young stated in its resignation letter that it was not willing to be associated with the financial statements prepared by the management of Super Micro. The auditor also expressed concerns about the board’s independence from CEO Charles Liang and other members of management.
Ernst & Young was brought in to audit Super Micro for the first time for the 2024 fiscal year. However, the company has not yet released its financial statements for this year and is reportedly under federal investigation. Super Micro is known for producing computers used by companies as servers for various applications, including artificial intelligence algorithms. Major players in the AI industry such as Nvidia, AMD, and Intel are among the company’s customers.
The issues with Super Micro’s internal financial controls, governance, and transparency were initially raised by the auditor in late July. This led to the appointment of a special board committee to investigate the company’s internal controls. Ernst & Young’s concerns were raised before a report by a short seller criticized Super Micro’s financial controls and accounting practices.
Super Micro has faced regulatory scrutiny in the past over its accounting practices and was required to pay a $17.5 million penalty to the Securities and Exchange Commission in 2020 for allegedly recording revenue prematurely and improperly. In response to the current situation, the company has enlisted the help of law firm Cooley and a forensic accounting firm to review its internal controls, with the review still ongoing.
Representatives for Super Micro and Ernst & Young have not yet provided any comments on the matter. It is important to note that Charles Liang is the CEO of Super Micro, and his name was misspelled in an earlier version of this article. The company’s shares had experienced a significant surge of 246% in 2023 and had joined the S&P 500 in March. However, the recent developments have had a major impact on the stock value of Super Micro. Investors and analysts will be closely monitoring the situation as it continues to unfold.
