Super Micro Computer Under Investigation by DOJ for Alleged Accounting Irregularities

Shares of Super Micro Computer plummeted on Thursday following a report that the U.S. Department of Justice (DOJ) is investigating the server manufacturer for alleged accounting irregularities. Early afternoon trading saw the stock price drop by more than 10%, further intensifying scrutiny on the company.

The investigation by the DOJ was reportedly initiated after an activist short-selling firm published a critical report about Super Micro Computer, alleging various operational and financial malpractices. The report, which cited unnamed sources, accused the company of accounting manipulation, export control failures, and issues with customer relations.

Super Micro Computer’s shares witnessed a sharp decline after it filed a notice with the Securities and Exchange Commission (SEC), announcing a delay in the release of its annual report for the fiscal year that ended on June 30. In a statement, the company indicated it requires more time “to complete its assessment of the design and operating effectiveness of its internal controls over financial reporting.”

According to The Wall Street Journal, which was the first to report on the probe, a prosecutor from the U.S. Attorney’s Office has requested information from Super Micro Computer regarding a former employee’s claims of accounting violations. A spokesperson for the DOJ has not made any public comment on the investigation.

The allegations surfaced weeks after Hindenburg Research, a well-known short-selling firm, published a report accusing the company of “accounting manipulation.” This revelation placed significant pressure on Super Micro Computer’s stock, which has fallen nearly 30% over the past month.

Despite being hailed as a top performer on the S&P 500 index at one point, Super Micro’s stock has experienced a dramatic downturn. The company’s shares, which were previously outperforming those of other chipmakers, like Nvidia, continue to struggle in the market.

Currently, Super Micro Computer’s stock has a consensus Hold rating from 13 Wall Street analysts, based on a mix of two Buy, 10 Hold, and one Sell ratings in the past three months. The average price target set by analysts suggests a potential upside of 52.55% from its current levels.