MW Super Micro's troubles build as auditor resigns, sending stock tumbling 30%
By Emily Bary
Super Micro filing indicates Ernst & Young flagged governance concerns back in July, which was before a short seller's report put them on the minds of investors
Super Micro Computer Inc.'s challenges are building with the resignation of the server maker's accounting firm.
The company disclosed Ernst & Young's resignation in a Wednesday morning filing, while also getting into the auditor's reasons for parting ways. The resignation is the latest chapter related to concerns about Super Micro's $(SMCI)$ financial controls that have been swirling recently.
Super Micro shares are tumbling 30% in morning trading Wednesday, which would be their second-worst drop on record if it holds through the close.
Back in July, Ernst & Young raised to Super Micro's audit committee "concerns about several matters relating to governance, transparency and completeness of communications to EY, and other matters pertaining to the company's internal control over financial reporting, and that the timely filing of the company's annual report was at significant risk," according to the filing Wednesday.
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That communication from Ernst & Young came before a Hindenburg Research report alleged issues with Super Micro's accounting in late August, which rocked Super Micro shares at the time. The company then said it would delay its annual filing to review its controls.
Super Micro's board created an independent special committee to look into these matters and said the review is still ongoing, but Ernst & Young got some information in the process.
In the resignation letter, Ernst & Young said it was "resigning due to information that has recently come to our attention which has led us to no longer be able to rely on management's and the audit committee's representations and to be unwilling to be associated with the financial statements prepared by management, and after concluding we can no longer provide the audit services in accordance with applicable law or professional obligations," according to Super Micro's filing.
Ernst & Young didn't immediately return a MarketWatch request for comment. A Super Micro spokesperson didn't immediately respond to a request for further comment.
Super Micro said in the filing that it "disagrees with EY's decision to resign as the Company's independent registered public accounting firm," noting that the review is not complete.
-Emily Bary
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October 30, 2024 09:47 ET (13:47 GMT)
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