Rosenblatt Securities suspended its rating, price target, and estimates for Super Micro Computer (NASDAQ:SMCI) stock, citing financial uncertainty following recent developments.
Notably, the AI server maker disclosed in an 8-K filing on Wednesday that Ernst & Young (EY) resigned as the company's registered public accounting firm last week.
SMCI shares nosedived more than 32% Wednesday following the news and lost an additional 5% in Thursday premarket trading.
The resignation stemmed from issues related to governance, transparency, and the completeness of communications from Super Micro to EY, as well as concerns over internal control of financial reporting.
EY in its resignation letter noted it was “unwilling to be associated with the financial statements prepared by management.” It also voiced concerns about the board’s independence from CEO Charles Liang and “other members of management.”
As a result, Super Micro is now in search of a new accounting firm and has indicated that it does not anticipate the need to restate its financials for fiscal year 2024 or for prior years.
The company previously delayed its 10-K filing in early September but suggested no material changes would be made to its fiscal quarter ending in June or the full fiscal year.
Super Micro has formed a Special Committee to review the company's internal controls and its management has disagreed with EY's decision, considering the review is still in progress.
“Due to the changes undergoing at EY, we believe EY may also be removing itself from riskier profile projects,” Rosenblatt analyst Hans Mosesmann said in a note.
“Given the uncertainty surrounding the company's financials, we are suspending our rating, price target, and estimates on Super Micro until we have an outcome that can determine our recommendation,” he added.
Further information is expected to be provided by Super Micro's management during the company's Q1 FY25 earnings call scheduled for November 5th.