Thinking of Buying Super Micro Computer Stock? 3 Things You Should Know

Super Micro Computer (NASDAQ: SMCI), the AI server maker, has taken investors on a wild ride over the last three months.

The company’s troubles began with a short-seller report from Hindenburg Research at the end of August, alleging a wide range of accounting irregularities. That was shortly followed by a delay in the filing of its 10-K, and in September the Department of Justice reportedly opened up an investigation into the company. It also received a delisting warning from the Nasdaq stock exchange. Last month, the company’s troubles reached a fever pitch when its auditor, Ernst & Young, resigned, and it also delayed its first-quarter 10-Q filing. It released preliminary first-quarter results but was unable to release a complete report, and the stock continued to spiral, hitting bottom at an intraday low of $17.25 on Nov. 15 ahead of the Nasdaq’s deadline to stay in compliance. That marked a 69% decline from before the short-seller attack.

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However, since then, Supermicro has scored some redemption with investors as it hired a new auditor and sent a compliance plan to the Nasdaq. As of Nov. 22, the stock was up 92% from the low on Nov. 15.

Investors clearly see a recovery potential in Supermicro stock, but if you’re thinking of buying it, you should understand the risks the company still faces. Let’s review a few things you should know.

Image source: Getty Images.

Investors cheered on Nov. 18 when Supermicro announced that it hired BDO USA as its new auditor, but that may be a bigger risk than investors think as BDO has faced its own regulatory problems.

For example, the company was fined $2 million last year for failing to correctly vet revenue calculations in a 2018 audit.

An audit quality report from the Public Company Accounting Oversight Board found significant mistakes in 54% of BDO audits from 2020 that it examined and 53% in 2021. BDO has also said it has made investments to improve the quality of its audits, recognizing its…

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