SMCI: EY Resigns as Auditor of Super Micro - Stock Plummets
EY's Resignation and the Subsequent Stock Drop
On February 24, 2023, Ernst & Young (EY) announced its resignation as the auditor of Super Micro Computer, Inc. (SMCI). The news sent SMCI's stock price tumbling by over 20% in pre-market trading.
EY's resignation follows an investigation by the National Audit Office (NAO) into SMCI's accounting practices. The NAO's report, published in January 2023, identified several areas of concern, including:
- Aggressive revenue recognition
- Inadequate internal controls
- Potential conflicts of interest
Market Reaction to EY's Resignation
Investors reacted swiftly to EY's resignation, sending SMCI's stock price into a tailspin. The stock fell more than 20% in pre-market trading and continued to decline in regular trading hours.
The sell-off was likely triggered by concerns about the company's accounting practices and the potential for financial restatements. EY's resignation also raised questions about the accuracy of SMCI's financial statements and its overall financial health.
SMCI's Response to EY's Resignation
SMCI issued a statement in response to EY's resignation, expressing disappointment with the firm's decision. The company said that it is "committed to maintaining the highest standards of accounting and financial reporting" and that it will "work diligently to address the concerns raised by EY.
SMCI also announced that it has appointed PricewaterhouseCoopers (PwC) as its new auditor. PwC is one of the world's largest accounting firms and has a strong reputation for quality and independence.
Implications for Investors
EY's resignation as auditor of SMCI is a significant development that raises concerns about the company's accounting practices and financial health. Investors should carefully consider the implications of this news before making any investment decisions.
It is important to note that EY's resignation does not necessarily mean that SMCI has engaged in any wrongdoing. However, it is a red flag that investors should be aware of.