Super Micro shares fall after short-seller Hindenburg Research calls the company a ‘serial repeat offender’ in a new report

Super Micro Computer (SMCI) shares fell 2% Tuesday morning after a report from short-seller Hindenburg Research alleged, among other things, “accounting manipulations” at the AI ​​giant. Super Micro shares had fallen as much as 8% in premarket trading after headlines about the Hindenburg report.

Hindenburg Research said its three-month investigation uncovered “glaring accounting red flags, evidence of undisclosed related-party transactions, sanctions and export control violations, and customer issues.” The firm disclosed Tuesday that it had taken a short position in Super Micro.

Yahoo Finance reached out to Super Micro and had not heard back from the company at the time of publication.

The maker of data center servers and management software has caught investors’ attention this year as it rides the artificial intelligence wave. The company is buying components from AI chipmaker Nvidia (NVDA).

Super Micro shares soared from $290 in early January to more than $1,200 in March. The stock is down about 50% from its March peak, but it is still up 90% year to date. The company recently announced a 10-for-1 stock split, effective October 1.

In its report, Hindenburg claims that despite a $17.5 million settlement in August 2020 with the SEC following an investigation into “widespread accounting violations,” Super Micro’s business practices did not improve and senior executives who left amid the scandal were subsequently rehired.

The report quotes a former salesman: “Almost all of them are back. Almost all of the employees who were fired and who were behind this malfeasance.”

The report said: “Even after the SEC settlement, pressure to meet quotas pushed vendors to fill the channel with distributors using “partial shipments” or shipping defective products late in the quarter, according to our interviews with former employees and customers.”

“Overall, we believe Super Micro is a serial offender,” Hindenburg said in its report.

“It has benefited from its pioneering status, but it still faces significant accounting, governance and compliance issues and offers an inferior product and service, now being eroded by more credible competition.”

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