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Super Micro’s shares plunged as much as 35% Wednesday morning after the company disclosed its auditor had resigned following months of disagreement with the firm over its governance and board independence.
Ernst & Young in its resignation letter said it was “unwilling to be associated with the financial statements prepared by management.” The accountancy also raised concerns about the board’s independence from CEO Charles Laing and “other members of management.”
EY had been hired to audit Super Micro for the first time for the 2024 fiscal year, the company said. Super Micro has still not issued its financial statements for this year, and is reportedly under federal investigation.
Super Micro makes computers that companies use as servers for websites, data storage and other applications, including AI algorithms. The company’s customers include major players in AI such as Nvidia, AMD and Intel. Shares of Super Micro, which joined the S&P 500 in March, surged 246% in 2023.
The auditor first flagged issues with Super Micro’s internal financial controls, governance and forthcomingness in late July, prompting the server firm to appoint a special board committee to investigate the company’s internal controls.
“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,” EY said in its resignation letter. EY’s concerns were raised prior to a short-seller report that took aim at Super Micro’s financial controls and accounting practices.
Super Micro has run into trouble with regulators over its accounting practices before. It paid a $17.5 million penalty to the Securities and Exchange Commission in 2020 after the regulator alleged it prematurely and improperly recorded revenue.
The company hired law firm Cooley and a forensic accounting firm to review Super Micro’s internal controls. That review remains ongoing, the company said in a regulatory filing.
Representatives for Super Micro and Ernst & Young did not immediately return a request for comment.
