The Boqueron crater, or what speculative smaller cap stock charts looks like today (Sergi Reboredo/Getty Images)

Super Micro Computer craters after auditor resigns

The stock has now given back most of the blockbuster gains it made earlier this year.

10/30/24 9:04AM

Shares of Super Micro Computer, the server-maker that’s riding the wave of the AI boom, are crumbling after a company filing revealed that Ernst & Young resigned as its auditor.

While conducting an audit of its annual report, Ernst & Young “raised questions, including about whether the Company demonstrates a commitment to integrity and ethical values consistent with” best business practices around internal controls, according to Super Micro Computer.

The stock is down more than 30% in early trading, and has now given back most of the over 300% year-to-date gain it enjoyed as of March.

Nonetheless, Super Micro said that — other than this — it didn’t have any “disagreements” with Ernst & Young, nor any “reportable events” (both terms as defined by regulations). Other than that, Mrs. Lincoln...

Per the filing, Ernst & Young sent Super Micro a letter saying, in part, that “we are resigning due to information that has recently come to our attention which has led us to no longer be able to rely on management’s and the Audit Committee’s representations and to be unwilling to be associated with the financial statements prepared by management, and after concluding we can no longer provide the Audit Services in accordance with applicable law or professional obligations.”

Super Micro announced in late August that it was delaying the filing of its annual report “to complete its assessment of the design and operating effectiveness of its internal controls over financial reporting” — one day after short-seller Hindenberg Research published a scathing report alleging accounting irregularities, questionable governance, and even sanctions evasion at the company. Super Micro has still yet to file that annual report.

About a month later, The Wall Street Journal reported that the US Department of Justice was investigating the company. Both the DOJ and Hindenburg appear to be following up on allegations raised by former employee Bob Luong surrounding the firm’s accounting practices.

Tasha Matsumoto

Despite a modest rebound in tech, the S&P 500 closes slightly lower

The S&P 500 managed to erase most of its early morning losses through the session.

Matt Phillips6h

Speculative stocks rebound from early sell-off

As we head toward the last hour of a wild week of trading, the buckle-up vibes the market started out with Friday have mellowed into a modestly positive day, with the Invesco QQQ Trust and the SPDR S&P 500 ETF both in the green.

But the volatility was pretty wild for some of the high-beta momentum stocks that have taken some of the worst beatings in recent days.

Shares like Applied Digital and Bloom Energy saw cumulative swings on the day along the lines of 20 percentage points. Even those that haven’t quite managed to stay positive, like IREN and Oklo, have nonetheless erased sizable losses.

Why? Frankly, it’s impossible to say. The same uncertainties that the market was facing yesterday — doubts about further rate hikes, confusion about the state of the economy, jitters about the potential for the AI boom to turn into a bust — are still hovering out there somewhere. Perhaps it will take more than a 2-percentage point drop from record highs for the major indexes — about the extent of the recent sell-off — to dull the retail reflex to buy the dip.

Luke Kawa10h

Micron spikes on report that Samsung hiked memory chip prices by as much as 60%

Memory chip specialist Micron is soaring after Reuters reported that Samsung has raised prices of select memory chips by as much as 60% since September, citing two people with knowledge of the price changes.

Memory chips play a key supporting role in the AI boom by feeding high-powered GPUs with data to process.

Micron, the biggest US memory chip seller, has been on an absolute tear, more than doubling in price since the end of August. Shares recently traded more than 15% above the average analyst price target, a record based on data going back to 2007.

These days, you need a pretty good memory to keep up with all the bullish news flow surrounding memory chip stocks, whether it’s been reports of imminent price hikes for these chips, South Korean memory giant SK Hynix already being sold out of all its 2026 production, or Nvidia CEO Jensen Huang nodding at shortages of these valuable components.

Max Knoblauch11h

Warner Bros. Discovery rises as potential sale boils down to bidding war between Paramount, Comcast, and Netflix

The potential sale of Warner Bros. Discovery appears to have boiled down to three contenders: Paramount Skydance, Comcast, and Netflix.

All three entertainment giants are prepping bids for WBD, with a deadline of next Thursday for first-round offers, according to Wall Street Journal reporting. Warner Bros. shares climbed more than 2% in premarket trading on Friday.

Per the WSJ, Comcast and Netflix are mostly interested in WBD’s streaming assets, while Paramount — which is said to have had three offers rejected already — wants to buy the whole company.

According to people familiar with the companies’ plans, Paramount believes it has the clearest path toward regulatory approval, as it thinks Netflix’s cofounder, Reed Hastings, having supported Kamala Harris in the 2024 presidential election could be a significant hurdle in getting a deal approved, per the WSJ.

Exclusive | Paramount, Comcast, Netflix Prepare Bids for Warner as Deadline Approaches

Per the WSJ, Comcast and Netflix are mostly interested in WBD’s streaming assets, while Paramount — which is said to have had three offers rejected already — wants to buy the whole company.

Luke Kawa11h

Beyond Meat’s refinancing efforts that spurred meme stock rally now have shares down 67%

Well, with a bit of time and a lot of volatility, the dust is settling on how Beyond Meat’s refinancing efforts have gone.

This morning, management announced that its new 2030 notes could be converted at a price of about $1.7459, or around 85% above where shares are trading in the premarket in the midst of another big retreat.

The twists and turns that brought us here:

On September 29, the company announced its intention to replace $1.15 billion in convertible notes due in 2027 (with an interest rate of 0%) with a mix of stock and up to $202.5 million in new second lien convertible notes due in 2030 (with an interest rate of 7%). Prior to that, its stock closed at $2.85.

Shortly after management reached a deal with 97% of its 2027 noteholders in mid-October, Beyond Meat became a meme stock. Despite massive dilution that raised the company’s share count by more than 300% and made prior noteholders the new corporate owners, retail traders positioned for a potential short squeeze in the shares, thinking the refinancing would give the company a new lease on life.

Shares rose from a closing low of $0.52 on October 16 to an intermediate closing peak of $3.62 on October 21 — a near 600% rally in just three sessions. That propelled shares to well above where they were trading before these refinancing plans were announced. But the true frenzied zenith for Beyond Meat came the next session, when the stock more than doubled intraday on what were then record volumes of above 2 billion, only to ultimately close slightly lower. The air came out of the balloon almost immediately thereafter.

(A fun aside: in calculating the conversion rate for the 2030 convertible notes, management deems that day to have been a “market disruption event,” which removes it from the calculations and makes the conversion price lower than it otherwise would have been.)

Shares tanked on October 23 on heavy volumes, and then interest and trading activity in Beyond continued to wane — along with its share price. Delaying the release of Q3 results as management tried to figure out how big of a write-down to take and then issuing those numbers along with a weak Q4 sales outlook did nothing to change the narrative.

There’s no reason to think those 2030 notes will be converted any time soon, based on where the stock is trading. Because these 2030 notes provide the opportunity for “payment in kind” and Beyond is in a relatively stressed financial position, interest on these notes can be paid not just with cash but also (more likely) through the issuance of more stock or the accumulation of more debt.

In sum: Beyond Meat eliminated about $800 million in debt and all it got in exchange was a 67% decline in its stock price, a longer runway to make processed peas into faux meat, and an entertaining (and for those who bought into the meme rally without exiting at the right time, painful) story.