Super Micro Computer Under DOJ Investigation Following Hindenburg Allegations, Filing Delays Worry Investors

Super Micro Computer (SMCI) is reportedly under investigation by the U.S. Department of Justice following serious allegations from Hindenburg Research. The company, a major NVIDIA customer, delayed its annual report, prompting concerns among investors and raising questions about its financial practices.

DOJ Investigates Super Micro Computer After Serious Allegations by Hindenburg Research, Signaling Concern

In what is now seen as a significant development, the U.S. Department of Justice has reportedly investigated Super Micro Computer (SMCI), a retailer of high-performance servers and liquid-cooled AI racks. This comes after the meticulous short-seller firm Hindenburg Research leveled serious allegations against the company in an August report. The DOJ's involvement underscores the weight of these accusations.

According to a recent report by the Wall Street Journal, a prosecutor from the U.S. Attorney’s Office in San Francisco has contacted individuals with direct knowledge of the events outlined in Hindenburg's report. Although the investigation appears to be in its early stages, these initial inquiries suggest that the DOJ is taking Hindenburg's claims seriously.

For context, Hindenburg Research’s report accused Super Micro Computer of several questionable practices, including:

• There are allegations of distribution channel stuffing, where the sales team is said to push products to distributors based on inflated demand forecasts.
• Engaging in partial shipments to meet sales targets and inflate shipment counts.
• After settling with the SEC in 2020 for widespread accounting violations, the company allegedly rehired executives involved in those infractions. This led to another lawsuit in April 2024, accusing Super Micro of resuming improper revenue recognition practices.
• Nearly $1 billion in payments made over the past three years to non-arm's-length suppliers, such as Ablecom and Compuware.
  

Super Micro Computer Faces SEC Filing Delays Amid Internal Review, Risks Nasdaq Non-Compliance

In response to Hindenburg’s report, Super Micro Computer delayed filing its annual Form 10-K, required by the SEC, to conduct an internal review. The company’s fiscal year ended on June 30, 2024, and the annual report was due by August 30. The delay has raised concerns, and Super Micro now risks a fine from the SEC. Moreover, the Nasdaq Exchange recently notified the company that it was no longer in compliance with Nasdaq Listing Rule 5250(c)(1) due to the delay in filing its annual report.

Despite these developments, Super Micro Computer has maintained that it does not expect any material changes to its fourth-quarter or fiscal year 2024 financial results due to its internal review.

It is worth noting that Super Micro Computer holds a crucial relationship with NVIDIA, being its third-largest customer and also the company's biggest client. NVIDIA backs SMCI’s second-largest client, further highlighting the company's significant position within the tech industry.