Super Micro Computer stock (SMCI) cratered more than 14% Thursday to erase all of its year-to-date gains after a filing earlier this week revealed that accounting firm Ernst & Young resigned during the company’s audit.
On Thursday, Argus downgraded the server maker to Hold from Buy, with no price target. Meanwhile, analysts at Needham and Wells Fargo suspended coverage of the company.
Super Micro Computer has been under a cloud of auditory scrutiny since August, when short seller firm Hindenburg Research claimed “accounting manipulation” at the AI high flyer. The Department of Justice launched an investigation shortly after the report.
“The company’s loss of its auditing firm and the DoJ investigation mean that the stock no longer trades on fundamentals,” wrote Argus analyst Jim Kelleher.
“We will look to get SMCI back on the BUY list once the company engages with a new accounting firm, becomes timely on its filings, and resolves all matters before the DoJ,” added Kelleher.
On Wednesday the stock plunged roughly 33% after a filing revealed EY quit while conducting the audit for Super Micro’s fiscal year that ended on June 30, 2024.
In the resignation letter, EY said, “We are 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.”
In Wednesday’s 8-K SEC filing, Super Micro said in a statement it “disagrees” with EY’s decision and is “working diligently to select new auditors.”
Super Micro stock soared roughly 300% in the first three months of the year as the AI craze captivated Wall Street. Despite the accounting scrutiny circling the company since late summer, the stock was still positive for the year up until Thursday.
Year to date, the stock is down more than 1%.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.
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