No more trust in Supermicro: Auditor EY resigns mandate

Server manufacturer Supermicro is forced to look for a new auditor. Ernst&Young (EY), the company hired by Supermicro in March 2023 to audit its books, has resigned its mandate. Supermicro's share price plummeted following the announcement.

In a mandatory notification to the US Stock Exchange Commission (SEC), Supermicro announced that Ernst & Young had already dropped out a week ago, in the middle of the audit of the financial documents for the past financial year. Supermicro's financial year ran from July 1, 2023 to June 30, 2024.

At the end of July 2024, shortly after the deadline, the auditors had already raised serious concerns with the Group's management regarding its financial reporting. Supermicro then initiated an investigation by external law and finance firms, which had not yet been concluded by the end of October.

Auditors without confidence

However, some of the interim results caused considerable displeasure at Ernst&Young, who have now made serious accusations. Supermicro violated two principles of ethical corporate behavior. The company did not show sufficient commitment to integrity and ethical values, nor did it take its control function seriously enough. Nor could the auditors of the auditing firm trust the representations of Supermicro's management or the company's own audit committee. According to the termination letter, EY was "unwilling to be associated with the financial reports of [Supermicro's] management".

Meanwhile, the server manufacturer is keeping a low profile, referring to ongoing investigations into the matter. This did not prevent the share price from taking a rapid nosedive, which fell by over 30 percent meanwhile. Supermicro plans to publish preliminary information on the first quarter of the 2025 financial year in a webcast next Tuesday (November 5).

Extensive accusations from investors

Supermicro was recently the subject of extensive accusations from the analysis company Hindenburg Research. As a short seller, Hindenburg makes money by betting on falling share prices and therefore has a strong vested interest in bad news. In a report, Hindenburg claimed to have uncovered a key witness to unethical family ties between suppliers and the server manufacturer. The family of Supermicro boss Liang controlled various suppliers. It is still unclear whether the separation from Ernst&Young has a similar reason.

(cku)