Supermicro is experiencing a real stock market tear. The North American chip firm It sinks 30% during the day in the face of what could be a huge crisis. The reason is that EY has announced that it is leaving the firm after major discrepancies related to its accounts. According to the audit itself, it had shown “concerns about various issues related to governance.” EY has announced this through a statement to the US Securities and Exchange Commission (SEC).
“In late July, EY raised concerns with the audit committee about several issues related to governance, transparency and integrity in communications (with the auditor),” the company comments in the letter. The company refers to internal control problems over “financial information and the presentation of the annual report, which was at significant risk.”
From Super Micro they have announced that they will appoint a special committee and oppose Cooley LLP and Secretary Advisors. But EY has already made a decision, “we resign due to information that has recently arrived and that leads us to no longer trust both management and the audit committee and not wanting to be associated with the financial statements prepared by that management.”
This latest episode with EY has not been the last problem that Super Micro has had with its accounts and that has caused panic. In August of this year the company was accused of accounting irregularities by the bearish fund Hindenburg Research. The firm said it had taken a short position after detecting flaws in its accounts. The company, at that time, delayed the presentation of its results, something that preceded a 25% collapse in a single session.
In his indictment, Hindemburg explained that the AI firm, then valued at $35 billion (and now at $19 billion), had encountered problems since 2017, when the company was delisted from Nasdaq for not presenting results. They recalled that in 2020 the SEC accused it of “widespread accounting violations” over $200 million in incorrectly recognized revenue, while underestimating expenses. A situation that caused “artificially high profits.”
According to Hindenburg, “three months after paying the SEC fine of $17.5 million (for these reasons), Super Micro agreed to rehire the executives who were involved in the accounting scandals.” The firm claims to have interviewed a former salesperson of the firm who defended that “almost all of those who were fired have returned.” This management would have once again “restarted the inadequate recognition of its billing” and “circumvented internal accounting controls.” Now, EY’s decision two months after abandoning it after losing trust once again brings a dark cloud over the case and gives rise to the idea that there may be a problem in the AI giant’s accounts.
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