Super Micro Computer (NASDAQ: SMCI) Under Investigation by U.S. Department of Justice - What Investors Need to Know
In a recent report by the Wall Street Journal, it has been revealed that Super Micro Computer, a prominent player in the artificial intelligence server industry, is currently under investigation by the U.S. Department of Justice (DoJ). This investigation comes following concerns raised by activist short-selling firm Hindenburg Research regarding the company's accounting practices.
The probe, which is still in its early stages, is reportedly being conducted by a prosecutor from the U.S. attorney's office in San Francisco. The focus of the investigation appears to be related to allegations of accounting violations made by a former employee, Bob Luong, in a whistleblower lawsuit filed earlier this year.
According to the Wall Street Journal, Luong's lawsuit accuses Super Micro of improperly recognizing revenue from 2020 to 2022, including booking incomplete sales and shipping incomplete equipment to customers. The company, known for its servers using Nvidia chips for generative AI, has seen its stock price plummet after reaching a peak value of $66 billion earlier this year.
In response to the report, shares of SMCI have dropped around 12% on Thursday. Additionally, Hindenburg Research's August report highlighted questionable transactions between Super Micro and companies owned by CEO Charles Liang's family, as well as allegations of shipments to Russian companies in violation of U.S. sanctions.
Following these developments, Super Micro announced a delay in filing its annual report and formed a board committee to review internal controls. CEO Charles Liang defended the company in a letter to customers, refuting the allegations in the short-seller report as "false or inaccurate." The company has also requested that Luong's lawsuit be moved to arbitration, with a court hearing scheduled soon.
In conclusion, investors should closely monitor the developments surrounding Super Micro Computer as the investigation by the U.S. Department of Justice unfolds. The outcome of this probe could have significant implications for the company's financial health and stock performance. It is important for investors to stay informed and consider the potential risks associated with investing in Super Micro amid these allegations of accounting violations and questionable practices.