The share value of Super Micro Computer experienced another significant decrease during this week.
Supermicro's stock experienced a significant drop during the last trading week, closing at a 24.2% decrease from the previous week's market close. According to data from S&P Global Market Intelligence, the company's share price ended the week down 8.26%.
The decline in Supermicro's stock value can be attributed to several factors. Firstly, there were rumors that the company might miss its filing deadline for submitting its 10-Q report to the SEC. Secondly, tech giant Cisco announced its plans to enter the artificial intelligence (AI) server market, which negatively impacted Supermicro's share price. As a result, Supermicro's share price has plummeted 35% since the beginning of the year and is down 84% from its all-time high, which it reached in March.
Delayed filings and competitive challenges facing Supermicro
To continue trading on major stock exchanges, public companies are required to submit regular financial reports and disclosures. Given that Supermicro has yet to file its annual 10-K report for its 2024 fiscal year, which ended on June 30, it was expected that the company would not be able to meet its first-quarter filing deadline for its current fiscal year. However, news of a delayed 10-Q report highlighted a significant risk factor for investors.
Since Supermicro has not filed its 10-K report within the grace period, the company's stock is at risk of being delisted from the Nasdaq Stock Market. In October, Ernst & Young stepped down as Supermicro's auditor, citing concerns about management's financial representations. To date, Supermicro has not hired a new auditor, and key work on preparing filings for the SEC cannot proceed until a new auditor is hired.
To make matters worse, Supermicro's competitive positioning has become riskier due to potential changes in the market. In its quarterly report last week, Cisco provided more details about its push into the AI server market. Despite earlier expectations, Cisco will be using Nvidia's advanced graphics processing units (GPUs) as the central component of its servers. Previously, there were reports of Nvidia diverting GPU orders away from Supermicro to competitors in the space, and it appears that some of those orders are now going to Cisco.
So what's next for Supermicro?
Supermicro's stock experienced a rally in after-hours trading on Friday, and it's likely that the company will open Monday's trading session with significant gains. Supermicro has announced that it plans to submit a filing plan to the Nasdaq exchange, which will allow it to avoid immediate delisting. If the plan is not submitted and accepted, the stock will be removed from the exchange and will begin trading over the counter.
However, it seems likely that the near-term scenario of avoiding delisting will be achieved. Plenty of questions still remain about Supermicro's financials, and the stock appears poised for further volatility.
Investors might want to be cautious when considering further investments in Supermicro's stock, given its financial difficulties and the intensifying competition in the AI server market. To keep trading on the Nasdaq, Supermicro needs to submit its delayed filings and hire a new auditor as soon as possible.
