Shares of Super Micro Computer (SMCI) surged over 30% on Monday after the release of a special committee report reaffirmed there was "no evidence of misconduct" within the company's leadership. The embattled AI server maker, which has faced scrutiny over its financial reporting and governance, also announced plans to transition its Chief Financial Officer and bolster its compliance infrastructure.
The independent review, conducted by a special committee with support from forensic accounting firm Secretariat Advisors and legal counsel from Cooley LLP, followed a three-month investigation into allegations raised by former auditor Ernst & Young (EY). The committee found EY's concerns "not supported by the facts," citing no substantial issues with Super Micro's senior management or audit committee.
"The evidence reviewed by the Special Committee did not raise any substantial concerns about the integrity of Super Micro's senior management or Audit Committee, or their commitment to ensuring that the company's financial statements are materially accurate," Super Micro stated in a press release.
Despite the reassuring findings, the review highlighted operational lapses attributed to CFO David Weigand, such as delays in notifying auditors about the rehiring of former employees. Consequently, Super Micro has initiated a search for a new CFO. Kenneth Cheung, currently the vice president of finance and corporate controller, has been appointed as the company's Chief Accounting Officer.
The report's findings represent a turning point for Super Micro, whose shares had plummeted 65% from March highs following allegations of accounting irregularities by Hindenburg Research and the subsequent resignation of EY in October. The controversy came after Super Micro's meteoric rise, fueled by demand for AI-driven server systems and its inclusion in the S&P 500 earlier this year.
Super Micro continues to face challenges, including potential delisting from Nasdaq due to delays in filing audited financials for the fiscal year ending June. The company's newly appointed auditor, BDO, has yet to validate its financial statements. Super Micro expressed confidence in meeting compliance deadlines and maintaining its Nasdaq listing.
Super Micro says the company is confident that it will be able to keep its listing.
The review also recommended broader structural changes, including the creation of a Chief Compliance Officer and a General Counsel role, underscoring Super Micro's commitment to improving governance. The moves are seen as an effort to reassure investors and stakeholders about its financial practices.
Market analysts remain watchful. JPMorgan analysts noted the "next key watch points" include whether BDO will accept the findings of the special committee or conduct its own independent review. The outcome will also influence Nasdaq's decision regarding Super Micro's request for an extension to regain compliance.
Investor sentiment appeared optimistic, as shares jumped over 30%, with year-to-date gains now at approximately 30%. However, the stock remains far below its March peak, reflecting lingering uncertainties.
