Since the end of August, Super Micro Computer, Inc. has had a rough time.
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The company, also known as Supermicro, is one of America’s largest manufacturers of high-end servers—like the kind needed to power AI tasks. It took a beating in the stock market recently when activist investment short-selling firm Hindenburg Research released a report that alleged “glaring accounting red flags” at the company. After Hindenburg’s report was made public, Super Micro Computer’s stock (NASDAQ: SMCI) fell 20% to $443 per share.
Then last week, news of a possible Department of Justice (DOJ) probe into the company, possibly over those aforementioned “glaring accounting red flags,” sent the stock down another 12% to below $400 per share. (Supermicro didn’t respond to our request for comment about the rumored investigation, which was reported by Bloomberg.)
But today, SMCI’s share price is even lower, with shares now trading at around $42 as of the time of this writing. But if you’re an SMCI investor—don’t panic. The stock hasn’t crashed. It’s just split. Here’s what to know:
SMCI 10-for-1 stock split
As of yesterday’s close of market, SMCI’s stock price was $416.40 per share. But when markets opened this morning, its stock price was trading around $42 per share. The huge “drop” is because, after the closing bell yesterday, SMCI shares were split 10-for-1.
That means that for every SMCI share that existed yesterday, an additional nine shares exist today. But because there are now a total of 10 shares for every one share of SMCI stock that existed yesterday, that means each share is worth one-tenth the price it was yesterday—hence why SMCI’s stock price is so “low” today.
So is Super Micro Computer worth more or less today than yesterday?
Not accounting for any gains or losses in SMCI stock during today’s normal trading session, Super Micro Computer is worth essentially the same today as it was yesterday.
Creating more shares in a company doesn’t make it inherently more valuable, because the greater availability of shares makes each worth less at a commensurate rate.
Yesterday, Super Micro Computer’s market cap (the total value of all its shares) was worth about $243 billion—and today its market cap is roughly the same as of the time of this writing.
What those shares do in the future is yet to be seen. But SMCI stock could be in for a bumpy ride if the DOJ does indeed come out to confirm that it is investigating Super Micro Computer.
So stock splits are normal, right?
Correct. A few relatively recent examples include Nvidia, Walmart, Broadcom, and Chipotle. Companies often split their stock because the lower share price is seen as being more appealing to retail traders and employees.
This post originally appeared at fastcompany.com
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