Shares of the server maker Super Micro Computer Inc. plunged more than 14% in extended trading after the company delivered worse-than-expected financial results for its latest quarter and delayed the publication of a key report, exacerbating investors’ fears of a stock delisting.

The company, which is better known as Supermicro, posted preliminary fiscal first-quarter results showing that it expects to report earnings before certain costs such as stock compensation of 75 to 76 cents per share, ahead of Wall Street’s consensus estimate of 73 cents. However, revenue is expected to come to between $5.9 billion and $6 billion, below the expected $6.44 billion.

Supermicro, which is led by its Chief Executive Charles Liang (pictured), also offered a weak forecast, guiding for revenue of between $5.5 billion and $6.1 billion in the current quarter, below the consensus estimate of $6.84 billion.

The results are not yet finalized because of the company’s ongoing accounting issues, which have come under scrutiny since August, when it delayed the filing of its annual financial performance report after a short seller raised concerns over its dealings.

On a conference call with analysts, Supermicro said it was working diligently to hire a new auditing firm following the resignation of Ernst & Young LLP, which had been hired to review its accounts last March. As a result, the company is unable to provide annual guidance for investors.

The resignation of Ernst & Young was revealed in a filing last week. According to the accounting firm, it’s “no longer” able to rely on Supermicro’s management or its Audit Committee’s representations, and it doesn’t want to be associated with the financial statements they prepare. At the time, Supermicro said it disagreed with Ernst & Young’s decision, and said it’s working to find a new auditor.

Today, Supermicro said its independent Special Committee, which was formed by the board of directors and is led by independent counsel, has found “no evidence of fraud or misconduct on the part of management or the Board of Directors.”

Supermicro has been under scrutiny following an August report from the short seller research firm Hindenburg Research LLC, which revealed that it had discovered “glaring accounting red flags” in the company’s finances. Later that month, Supermicro said it would delay the filing of its 10-K for fiscal 2024 year ending June 30. Days after, Supermicro also delayed the publishing of its annual report, sending its stock down 20% on Aug. 28.

The story became even murkier when the Wall Street Journal reported in September that the U.S. Department of Justice has launched an investigation into the company. According to the Journal, that probe was at an “early stage,” though a prosecutor at the U.S. attorney’s office in San Francisco has been seeking information on a former employee at the company, who has been accused of accounting violations.

Supermicro’s stock has lost more than 55% of its value over the last three months, and is now down 3% in the year to date, compared with the Nasdaq’s 23% gain over the same period.

In a note to clients, Susquehanna analyst Mehdi Hosseini said there is “minimal trust in the company’s reported financials and guidance” and called for the company to revamp its board of directors and hire a reputable auditor to regain the confidence of investors.

In today’s update, Supermicro said it’s still unable to say when it will be able to publish its delayed 10-K, which was due on Aug. 29. This is a major concern for investors, because the company could see its stock delisted from the Nasdaq exchange if it doesn’t meet an imminent deadline to submit a plan showing how it intends to file the document.

The company told analysts today that it will “take all necessary steps to achieve compliance with the Nasdaq’s continued listing requirements as soon as possible.”

Today was an opportunity for the company to try and put the record straight and show investors that the doubts around its accounting are unsubstantiated, but it failed to do this, said Holger Mueller of Constellation Research Inc.

“The conference call did little to reassure investors, and the failure to replace its main auditor is a big warning sign that something is not right, as is the DOJ investigation into its affairs and the talk of a Nasdaq delisting,” Mueller said. “Assuming the self-reported revenue is correct, Supermicro also missed expectations, digging itself deeper into a hole. All in all, it’s not good news for investors and it’s little wonder the stock is down. The company will need to work very hard to show it can become a trusted AI growth stock.”

Supermicro hasn’t been helped by business pressures unrelated to concerns over its accounts. This year, it has struggled with significant margin pressures, causing some investors to question how meaningful its growing sales of artificial intelligence servers are in terms of the company’s bottom line.

Photo: Supermicro