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In what is now being interpreted as proof of the seriousness of allegations made by meticulous short-seller Hindenburg Research, the U.S. Department of Justice has reportedly launched an active investigation into misconduct at Supermicro Computer (SMCI), a retailer of high-performance servers and liquid-cooled AI racks.
To wit, The Wall Street Journal reports that prosecutors from the U.S. attorney’s office in San Francisco have recently been in contact with parties with direct knowledge of the events alleged in Hindenburg Research’s comprehensive short-term attack on Super Micro Computer in August. While the investigation appears to still be in its early stages, these preliminary contacts suggest that the Justice Department is taking Hindenburg’s allegations seriously.
For those who don’t know, Hindenburg Research has raised some major allegations against Super Micro Computer in its report.
SMCI’s sales teams allegedly stuff distribution channels by pushing products to distributors based on artificially inflated demand forecasts. Supermicro regularly makes partial shipments to meet certain sales targets and inflate total shipments. After the SEC accused Supermicro of “widespread accounting violations” in 2020 and paid a $17.5 million settlement, the company rehired the CEO responsible for those violations within three months. Another lawsuit was then filed in April 2024, alleging that SMCI resumed improper revenue recognition practices just three months after reaching a settlement with the SEC. SMCI has paid nearly $1 billion to non-arm’s length suppliers, including Ablecom and Compuware, over the past three years.
In response to this shocking report, Supermicrocomputer announced that it would delay filing its mandatory SEC-prescribed annual report on Form 10-K in order to conduct a comprehensive internal investigation.
As mentioned in our recent dedicated post, Super Micro Computer’s fiscal year ends on June 30, 2024, and the company was required to file its annual report by August 30. The company is now threatening to be fined by the SEC as it continues to delay filing its annual report. In addition, the company was recently notified by the Nasdaq Exchange that it is “not in compliance with Nasdaq Listing Rule 5250(c)(1) due to its delayed filing of its Annual Report on Form 10-K for fiscal year 2024.”
It’s important to note that Supermicro has continued to assert over the past few weeks that it does not expect its ongoing internal review to result in any “material changes” to its fourth-quarter or fiscal 2024 financial results.
Note that Supermicro is NVIDIA’s third-largest customer. Furthermore, SMCI’s largest customer is NVIDIA, and its second-largest customer is an NVIDIA-backed company.
