Super Micro is facing a deadline to take care of its Nasdaq listing after an 85% plunge

Super microcomputer might be heading in the right direction to be kicked off the Nasdaq as early as Monday.

That's the server company's potential fate if it doesn't give you a viable plan to comply with Nasdaq regulations. Super Micro is late filing its 2024 year-end report with the SEC and has yet to exchange its accounting firm. Many investors expected clarity from Super Micro when the corporate reported preliminary quarterly results last week. But they didn't understand.

The primary a part of this plan is how and when Super Micro will file its 2024 year-end report with the Securities and Exchange Commission and why it was late. Many expected this report back to be filed alongside the corporate's fourth quarter leads to June, but that was not the case.

The Nasdaq delisting process represents a crossroads for Super Micro, which is one among the primary beneficiaries of the substitute intelligence boom resulting from its long-standing relationship with Nvidia and increasing demand for the chipmaker's graphics processors.

The former AI darling has faltered after a series of bad news. After Super Micro did not file its annual report over the summer, activist short seller Hindenburg Research targeted the corporate in August, alleging accounting fraud and export control issues. The company's auditor, Ernst & Young, resigned in October, and Super Micro said last week that it was still trying to search out a brand new one.

The stock is faltering. After rising greater than 14-fold from late 2022 to their peak in March this yr, shares have since plunged 85%. Super Micro's stock is now at May 2022 levels after falling one other 11% on Thursday.

Next, delisting from the Nasdaq could occur if Super Micro fails to submit a compliance plan by Monday's deadline or if the exchange rejects the corporate's filing. Super Micro could also get an extension from Nasdaq, giving it months to return into compliance. The company said Thursday that it will submit a plan to Nasdaq in a timely manner.

A spokesperson told CNBC the corporate intends to “take all necessary steps to achieve compliance with Nasdaq's continuation listing requirements as quickly as possible.”

While the delisting issue primarily affects the stock, it could also damage Super Micro's popularity and popularity amongst its customers, who simply prefer to avoid the drama and select AI servers from competitors corresponding to. B. wish to buy Dell or HPE.

“Given that Super Micro's accounting concerns have increased since the end of Super Micro's quarter, the company's weakness could ultimately benefit Dell more in the coming quarter,” Bernstein analyst Toni Sacconaghi wrote in a note this week.

A Nasdaq representative said the exchange doesn’t comment on the delisting process for individual firms, but rules suggest the method could take a couple of yr before a final decision is made.

Nasdaq warned Super Micro on September 17 that the corporate was prone to delisting. This gave the corporate 60 days to submit a compliance plan to the exchange, and for the reason that deadline falls on a Sunday, the deadline for filing is Monday.

If Super Micro's plan is suitable to Nasdaq employees, the corporate shall be eligible for an extension of as much as 180 days to file its annual report. Nasdaq desires to know whether Super Micro's board has investigated the corporate's accounting issue, what the precise reason for the late filing was, and a timeline for motion taken by the board.

According to Nasdaq, several aspects are considered when evaluating a compliance plan, including the explanations for the late filing, upcoming corporate events, the corporate's overall financial condition and the likelihood that an organization will file an audited report inside 180 days. The review might also consider information provided by external auditors, the SEC or other regulatory authorities.

Last week, Super Micro said it was doing all the pieces in its power to stay listed on Nasdaq and said a special committee of its board had conducted the investigation and located no wrongdoing. Super Micro CEO Charles Liang said the corporate would receive the board committee report as early as last week. An organization spokesperson didn’t reply to CNBC's query about whether it had received this report.

If Nasdaq rejects Super Micro's compliance plan, the corporate can request a hearing with the exchange's hearing board to review the choice. Super Micro won’t be delisted immediately – the hearing panel's request leads to a 15-day suspension of listing, and the panel may determine to increase the period by as much as 180 days.

If the panel denies that request or Super Micro gets an extension and fails to file updated financials, the corporate can still appeal the choice to a different Nasdaq panel called the Listing Council, which might grant an exception.

According to Nasdaq, the extensions are ultimately limited: 360 days from the time the corporate's first late filing was due.

There is one factor that might hurt Super Micro's possibilities of an extension. The exchange checks whether the corporate has violated SEC regulations previously.

According to the SEC, between 2015 and 2017, Super Micro misstated financial information and delayed releasing essential filings. It was delisted from Nasdaq in 2017 and relisted two years later.

Super Micro “may have a more difficult time obtaining extensions because Nasdaq literature suggests that when deciding whether an extension is warranted, they consider in part “the company's specific circumstances, including the company's past compliance history will,” Wedbush analyst Matt Bryson wrote in a note earlier this month. He rates the stock neutral.

The story also shows how long the delisting process can take.

Super Micro missed the June 2017 deadline for filing annual reports, received an extension until December, and ultimately received a hearing in May 2018 that allowed an additional extension until August of the identical yr. Only when this deadline was missed was the share taken off the stock exchange.

In the short term, the larger concern for Super Micro is whether or not customers and suppliers will start giving up.

Compliance issues aside, Super Micro is a fast-growing company that makes one of the crucial sought-after products within the technology industry. Unaudited financial reports show revenue greater than doubled to almost $15 billion last yr, and the corporate has loads of money on its balance sheet, analysts say. According to FactSet, Wall Street expects even stronger revenue growth to about $25 billion in fiscal 2025.

Super Micro said last week that the filing delay “had some impact on orders.” In unaudited September quarter results released last week, the corporate posted slower growth than Wall Street expected. It also provided easy orientation.

The company said one reason for its weak results was that it had not yet received enough supplies of Nvidia's next-generation chip called Blackwell, raising questions on Super Micro's relationship with its key supplier.

“We don't think Super Micro's problems are a big deal for Nvidia, although in the near term it could shift some sales from one quarter to the next as customers route orders to Dell and others,” wrote Ben Reitzes, an analyst at Melius Research in a note this week.

Michael Staiger, head of corporate development at Super Micro, told investors in a call last week: “We have spoken to Nvidia and they have confirmed that they have not made any changes to the allocations. We maintain a close relationship with them.”