Making sense of market moves
Stay up to date on the latest market news with daily analysis of the investing landscape, served up Brew-style.
With the S&P 500 up 25% year to date, 2024 is largely a tale of success for AI stocks, which have managed to buoy the market despite their sky-high valuations.
But that’s with one notable exception: Super Micro Computer.
The former chipmaking darling has gone from a top AI pick to staring down the barrel of being delisted from the Nasdaq if it doesn’t clean up its act ASAP.
A series of super unfortunate events
Super Micro Computer’s relationship with Nvidia combined with investor enthusiasm about Big Tech chip demand boosted its share price to an all-time high back in March.
That’s when it received the ultimate stamp of market approval: joining the S&P 500.
But after Super Micro Computer failed to file its annual report in June, the vultures began to circle. Famed activist short seller Hindenburg was the first to strike, accusing the company of fraud and accounting problems.
From there, things went from bad to worse.
In September, the DOJ launched an investigation into the company’s auditing practices. While Super Micro Computer tried to defend itself, the sudden resignation of its auditor Ernst & Young in October indicated that Hindenburg was on to something.
Now, if the company doesn’t file a compliance plan with the SEC by Monday, or if the Nasdaq rejects its proposal, it could be delisted from the exchange.
If you’re a Super Micro Computer shareholder, you’ll still own the stock even if it's delisted. However, it will be traded on over-the-counter markets, where trading costs are higher and liquidity is lower. But also, if you’re still a Super Micro Computer investor after this year, you have our deepest sympathies.
Not its first rodeo: Super Micro Computer was delisted back in 2018 after an SEC probe into revenue recognition practices. After it was relisted in 2020, shares soared over the next three years. But just because you can hold on to a delisted stock doesn’t mean it's worth it.
Could Super Micro Computer pull off another comeback? Maybe. But we wouldn’t count on it.—LB