Super Micro shares fell 35% after the auditor resigned after raising concerns a few months ago

Super Micro's Shares fell 35% on Wednesday morning after the company's auditor resigned after months of disagreements over the company's governance and board independence.

Ernst & Young said in its resignation letter that it “does not wish to be associated with financial statements prepared by management.” The accountancy also raised concerns about the board's independence from CEO Charles Laing and “other members of management”.

EY was appointed to audit Super Micro for the first time for the 2024 fiscal year, the firm said. Super Micro has yet to issue its financial statements for this year, and is reportedly under federal investigation.

Super Micro makes computers that companies use as servers for websites, data storage and other applications including AI algorithms. Major AI players among the company's customers viz Nvidia, AMD And Intel. Shares of Super Micro, which joined the S&P 500 in March, are up 246% in 2023.

Auditors first identified problems with Super Micro's internal financial controls, governance and compliance in late July, prompting the server firm to appoint a special board committee to investigate the company's internal controls.

“We are resigning due to information that has recently come to our attention as a result of which we can no longer rely on the representation of management and the audit committee,” EY said in its resignation letter. EY's concerns were raised ahead of a short-seller report that took aim at Super Micro's financial controls and accounting practices.

Super Micro has previously run into trouble with regulators over accounting practices. It paid a $17.5 million fine to the Securities and Exchange Commission in 2020 after the regulator alleged it recorded revenue untimely and improperly.

The company hired law firm Cooley and a forensic accounting firm to review Super Micro's internal controls. That review is ongoing, the company said in a regulatory filing.

Representatives for Super Micro and Ernst & Young did not immediately return a request for comment.