Super Micro faces deadline to keep Nasdaq listing after 85% plunge in stock

Super Micro Computer could beryllium headed down a way to getting kicked disconnected the Nasdaq arsenic soon arsenic Monday.

That's the imaginable destiny for the server institution if it fails to record a viable program for becoming compliant with Nasdaq regulations. Super Micro is precocious successful filing its 2024 year-end study with the SEC, and has yet to regenerate its accounting firm. Many investors were expecting clarity from Super Micro erstwhile the institution reported preliminary quarterly results past week. But they didn't get it.

The superior constituent of that program is however and erstwhile Super Micro volition record its 2024 year-end study with the Securities and Exchange Commission, and wherefore it was late. That study is thing galore expected would beryllium filed alongside the company's June fourth-quarter net but was not.  

The Nasdaq delisting process represents a crossroads for Super Micro, which has been 1 of the superior beneficiaries of the artificial quality boom owed to its longstanding narration with Nvidia and surging request for the chipmaker's graphics processing units. 

The one-time AI darling is reeling aft a agelong of atrocious news. After Super Micro failed to record its yearly study implicit the summer, activistic abbreviated seller Hindenburg Research targeted the company successful August, alleging accounting fraud and export power issues. The company's auditor, Ernst & Young, stepped down successful October, and Super Micro said past week that it was inactive trying to find a caller one.

The stock is getting hammered. After the shares soared much than 14-fold from the extremity of 2022 to their highest successful March of this year, they've since plummeted by 85%. Super Micro's banal is present adjacent to wherever it was trading successful May 2022, aft falling different 11% connected Thursday.

Getting delisted from the Nasdaq could beryllium adjacent if Super Micro doesn't record a compliance program by the Monday deadline oregon if the speech rejects the company's submission. Super Micro could besides get an hold from the Nasdaq, giving it months to travel into compliance. The institution said Thursday that it would supply a program to the Nasdaq successful time. 

A spokesperson told CNBC the institution "intends to instrumentality each indispensable steps to execute compliance with the Nasdaq continued listing requirements arsenic soon arsenic possible."

While the delisting contented chiefly affects the stock, it could besides wounded Super Micro's estimation and lasting with its customers, who whitethorn similar to simply debar the play and bargain AI servers from rivals specified arsenic Dell oregon HPE.

"Given that Super Micro's accounting concerns person go much acute since Super Micro's 4th ended, its weakness could yet payment Dell much successful the coming quarter," Bernstein expert Toni Sacconaghi wrote successful a enactment this week.

A typical for the Nasdaq said the speech doesn't remark connected the delisting process for idiosyncratic companies, but the rules suggest the process could instrumentality astir a twelvemonth earlier a last decision.

The Nasdaq warned Super Micro connected Sept. 17 that it was astatine hazard of being delisted. That gave the institution 60 days to taxable a program of compliance to the exchange, and due to the fact that the deadline falls connected a Sunday, the effectual day for the submission is Monday.

If Super Micro's program is acceptable to Nasdaq staff, the institution is eligible for an hold of up to 180 days to record its year-end report. The Nasdaq wants to spot if Super Micro's committee of directors has investigated the company's accounting problem, what the nonstop crushed for the precocious filing was and a timeline of actions taken by the board.

The Nasdaq says it looks astatine respective factors erstwhile evaluating a program of compliance, including the reasons for the precocious filing, upcoming firm events, the wide fiscal presumption of the institution and the likelihood of a institution filing an audited study wrong 180 days. The reappraisal tin besides look astatine accusation provided by extracurricular auditors, the SEC oregon different regulators.

Last week, Super Micro said it was doing everything it could to stay listed connected the Nasdaq, and said a peculiar committee of its committee had investigated and recovered nary wrongdoing. Super Micro CEO Charles Liang said the institution would person the committee committee's study arsenic soon arsenic past week. A institution spokesperson didn't respond erstwhile asked by CNBC if that study had been received.

If the Nasdaq rejects Super Micro's compliance plan, the institution tin petition a proceeding from the exchange's Hearings Panel to reappraisal the decision. Super Micro won't beryllium instantly kicked disconnected the speech – the proceeding sheet petition starts a 15-day enactment for delisting, and the sheet tin determine to widen the deadline for up to 180 days.

If the sheet rejects that petition oregon if Super Micro gets an hold and fails to record the updated financials, the institution tin inactive entreaty the determination to different Nasdaq assemblage called the Listing Council, which tin assistance an exception.

Ultimately, the Nasdaq says the extensions person a limit: 360 days from erstwhile the company's archetypal precocious filing was due.

There's 1 origin astatine play that could wounded Super Micro's chances of an extension. The speech considers whether the institution has immoderate past of being retired of compliance with SEC regulations.

Between 2015 and 2017, Super Micro misstated financials and published cardinal filings late, according to the SEC. It was delisted from the Nasdaq successful 2017 and was relisted 2 years later.

Super Micro "might person a much hard clip obtaining extensions arsenic the Nasdaq's lit indicates it volition successful portion 'consider the company's circumstantial circumstances, including the company's past compliance history' erstwhile determining whether an hold is warranted," Wedbush expert Matt Bryson wrote successful a enactment earlier this month. He has a neutral standing connected the stock.

History besides reveals conscionable however agelong the delisting process tin take. 

Super Micro missed an yearly study filing deadline successful June 2017, got an hold to December and yet got a proceeding successful May 2018, which gave it different hold to August of that year. It was lone erstwhile it missed that deadline that the banal was delisted.

In the abbreviated term, the bigger interest for Super Micro is whether customers and suppliers commencement to bail.

Aside from the compliance problems, Super Micro is simply a fast-growing institution making 1 of the astir in-demand products successful the exertion industry. Sales much than doubled past twelvemonth to astir $15 billion, according to unaudited fiscal reports, and the institution has ample currency connected its equilibrium sheet, analysts say. Wall Street is expecting adjacent much maturation to astir $25 cardinal successful income successful its fiscal 2025, according to FactSet.

Super Micro said past week that the filing hold has "had a spot of an interaction to orders." In its unaudited September 4th results reported past week, the institution showed maturation that was slower than Wall Street expected. It besides provided airy guidance.

The institution said 1 crushed for its anemic results was that it hadn't yet obtained capable proviso of Nvidia's next-generation chip, called Blackwell, raising questions astir Super Micro's narration with its astir important supplier.

"We don't judge that Super Micro's issues are a large woody for Nvidia, though it could determination immoderate income astir successful the adjacent word from 1 4th to the adjacent arsenic customers nonstop orders toward Dell and others," wrote Melius Research expert Ben Reitzes successful a enactment this week.

Super Micro's caput of firm development, Michael Staiger, told investors connected a telephone past week that "we've spoken to Nvidia and they've confirmed they've made nary changes to allocations. We support a beardown narration with them."