Super Micro Computer delays filing annual report a day after short seller alleges “glaring accounting red flags”

What’s the worst thing that could happen after a short seller releases a lengthy report alleging that your company has accounting irregularities, subpar governance, quality issues, and even sanctions evasion?

Well, that would be the CEO coming out and saying, “It’s all true!”

But not too far down the list would be for the company to immediately delay filing a financial report because it needed to reassess its accounting.

The server solutions provider said in a statement on Wednesday morning that “it will not timely file its Annual Report on Form 10-K for the fiscal year ended June 30, 2024.”

Why?

“Additional time is needed for SMCI’s management to complete its assessment of the design and operating effectiveness of its internal controls over financial reporting as of June 30, 2024,” according to the press release.

Hindenburg Research’s short thesis on SMCI pointed to a history of “glaring accounting red flags” and also said the company has a number of business relationships in which it deals with other firms that are also controlled by CEO Charles Liang, his wife, or his brothers.

Where there’s smoke, there’s fire. But also, where there’s smoke there are often firefighters coming to the scene. It’s way too early to know which one it is for sure yet.

But either way, smoke isn’t good, and investors are taking no chances: Shares are down more than 20% in the opening half-hour of trading on Wednesday as investors price in a higher likelihood that the allegations raised in Hindenburg Research’s short report might be valid.

“The company said it's investigating the effectiveness of its internal controls, though noted that may not lead to updates to its financials,” said Bloomberg Intelligence analyst Woo Jin Ho. “It appears likely there are lingering governance issues.”