Super Micro Computer, better known as Supermicro, is going through one of the most contentious periods in its 30-plus year history this week thanks to two major events. The first is news that the Department of Justice (DOJ) is reportedly investigating the AI server company’s accounting practices. The second is an upcoming stock split.
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And speaking of that stock, shares of Supermicro (Nasdaq:SMCI) plunged over 12% yesterday after news of the alleged DOJ investigation broke. Here’s what you need to know.
DOJ investigation
The most troubling news for Supermicro this week came after the Wall Street Journal reported that the company was under investigation by the Department of Justice over alleged accounting irregularities. Neither the DOJ nor Supermicro have confirmed the investigation, which the WSJ says is in its early days.
We’ve reached out to Supermicro for comment.
As for why the DOJ has allegedly launched an investigation, it likely has to do with a Hindenburg Research report on Supermicro from late August. Hindenburg Research is an activist investment short-selling firm. In its report, the firm alleged that throughout the course of its three-month investigation, it found “glaring accounting red flags,” as well as sanctions and export control failures, and evidence of undisclosed related party transactions.
After Hindenburg’s report was published in late August, SMCI shares plummeted from a high of $557 on August 27 to close at just above $443 on August 28—a drop of around 20%.
And with yesterday’s news of a possible DOJ probe, SMCI shares dropped another 12%. As of the time of this writing, SMCI shares are currently trading about 1.6% lower in premarket at around $396 per share.
While all this is happening, Supermicro’s shares are due to split next week. The company announced the stock split back in early August—nearly three weeks before Hindenburg’s report came out.
It is a 10-for-1 split, which means that after the split, there will be 10 times the number of SMCI shares as there were before the split, but each share will be worth just one-tenth of what it was presplit.
The split is due to take place after the closing bell on Monday, September 30. On Tuesday, October 1, SMCI shares will begin trading at their post-split price.
Usually, when a stock is just a few days away from splitting, it’s pretty easy to estimate at what rough price the split shares may begin trading around. But with the news of the possible DOJ probe, SMCI stock could be volatile between now and then.
But let’s assume that SMCI shares are trading around their current price of around $400 on Monday; that would mean that on Tuesday morning, the split-adjusted price of SMCI shares would be around $40 each.
Supermicro’s AI server solutions are used at companies in industries as diverse as healthcare, retail, and manufacturing.
This post originally appeared at fastcompany.com
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