Super Micro Investors Whiplashed as Tech Firm Fights For Listing

(Bloomberg) — A roller-coaster ride for Super Micro Computer Inc. shares is likely to continue for some time, as investors weigh the company’s next steps to avoid being delisted by Nasdaq Inc.

Most Read from Bloomberg

The server maker soared almost 60% this week after it hired BDO USA as its independent auditor and filed a plan to comply with Nasdaq listing requirements. It’s the latest twist in a saga that saw the once-hot stock hit a record high in March before seeing those gains evaporate amid allegations of accounting and governance issues and filing delays.

The company this week said that it believes it can file its delayed 10-K and 10-Q reports in the period available under Nasdaq rules. If Super Micro’s proposal is accepted, it would likely get until mid-February to file. That sets up months of further uncertainty — leaving investors to decide whether to stick with the stock in hope of a recovery, or bail out.

“I really think it’s just a complete coin toss right now,” said Larry Tentarelli, chief technical strategist at Blue Chip Daily. Tentarelli said he previously held shares of Super Micro but sold near the end of July when the stock was in the $80 range.

Representatives for Super Micro and Nasdaq did not immediately respond to Bloomberg News requests for comment.

The San Jose, California-based firm delayed filing its annual 10-K, following a damaging report earlier this year from short seller Hindenburg Research, and has said it would be late with quarterly reports.

The firm’s previous auditor, Ernst & Young LLP, resigned in October, citing concerns over the company’s transparency and governance. Super Micro is also facing a US Department of Justice probe.

Bloomberg Intelligence analyst Woo Jin Ho is reserving judgment on whether Super Micro can recover.

“The filing extension gives the company until late February to file the documents, yet the delisting overhang appears likely to persist until it’s compliant,” he wrote. “Given the challenges that Ernst and Young noted working with Super Micro’s board, it’s unclear if BDO will face similar issues.”

Nasdaq must now review and approve the company’s plan, a process that is expected to take about two weeks. If the exchange doesn’t accept the proposal, Super Micro can appeal the decision. Shares will remain listed in the meantime.

Others on Wall Street are more bullish, seeing Super Micro as too important to be delisted and booted from the S&P 500 Index. The company won inclusion in the benchmark gauge in March, further juicing its staggering returns to that point.

With the possibility of a delisting now reduced, “we expect the stock to make a run for our price target in the near-term,” said Lynx Equity Strategies analyst KC Rajkumar, who has a target of $45, implying more than 50% upside from Thursday’s close.

Still, several other analysts aren’t willing to make a call, with at least seven firms suspending coverage on the stock since the end of October, when previous auditor Ernst & Young LLP resigned, according to data compiled by Bloomberg.

While weighing up Super Micro’s prospects, investors also have their eye on competitors. The company’s woes could be a potential boon to rival server makers including Dell Technologies Inc., Lenovo Group Ltd. Wiwynn Corp., Hon Hai Precision Industry Co. and Pegatron Corp., according to Bloomberg Intelligence. Dell shares have risen in November while Super Micro slumped.

On the flip side, with the possibility of a Super Micro delisting now reduced, hardware peers such as Dell may “stand in danger of a stock fade,” Lynx analyst Rajkumar wrote.

Tech Chart of the Day

Bitcoin flirted with a run toward the landmark $100,000 level, buoyed by expectations of friendly US regulations and expanding investor interest courtesy of President-elect Donald Trump’s support for crypto.

Top Tech News

Apple Inc. is racing to develop a more conversational version of its Siri digital assistant, aiming to catch up with OpenAI’s ChatGPT and other voice services, according to people with knowledge of the matter.
DirecTV has notified EchoStar Corp. of its intention to terminate an acquisition of Dish Network Corp. after they failed to win the consent of bondholders for a key debt exchange, all but killing a deal to create the largest US pay-TV service.
Alphabet Inc.’s Google would be forced to unwind its partnership with artificial intelligence startup Anthropic if a federal judge accepts the US Justice Department’s proposal to resolve a landmark antitrust case over online search.
Bain Capital-backed Kioxia Holdings Corp. is setting its indicative IPO price at ¥1,390 per share, the latest attempt to capitalize on Japan’s stock market renewal.
Intuit Inc., the maker of the TurboTax tax preparation software, dropped in extended trading after giving a sales and profit outlook for the current quarter that fell short of analysts’ estimates, disappointing investors looking for a boost from the company’s new AI products.
The Federal Communications Commission voted unanimously on Thursday to launch a “major, comprehensive review” and update of rules governing submarine cables amid an increase in potential nation-state-sponsored attacks on the critical infrastructure.

Earnings Due Friday

–With assistance from Sunil Jagtiani.