The U.S. Department of Justice (DOJ) is currently investigating Super Micro Computer (SMCI.O) following allegations of “accounting manipulation” made by short-seller Hindenburg Research, as reported by the Wall Street Journal on Thursday. The news led to a significant drop in Super Micro’s shares, which fell approximately 12%.
According to the Journal, the investigation is still in its early stages. A prosecutor from a U.S. attorney’s office has reached out to individuals who may possess pertinent information related to the case. The inquiries appear to be linked to a former employee who has accused the company of accounting irregularities.
Last month, Super Micro postponed the filing of its annual report, citing the need to evaluate its “internal controls over financial reporting.” This announcement followed Hindenburg’s public disclosure of a short position and claims of accounting issues. The short-seller’s three-month investigation involved interviews with former senior employees and a review of legal documents.
Among Hindenburg’s allegations were claims of undisclosed related-party transactions and violations of export controls. Super Micro has denied these assertions.
In response to the report, Super Micro declined to comment, while the DOJ stated it cannot confirm or deny the existence of an investigation.
Earlier this year, a Reuters review of tender documents indicated that Chinese entities obtained high-end Nvidia (NVDA.O) chips embedded in server products from several companies, including Super Micro, via resellers. The U.S. government has intensified its scrutiny of technology sales to China.
Despite the recent scrutiny, Super Micro has emerged as a key player in the generative AI sector, with its market value soaring to $67 billion in March from approximately $4.4 billion. However, the excitement surrounding AI stocks has begun to wane as investors adjust their expectations regarding the timeline for returns on these companies’ substantial investments.
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