Super Micro Computer falls as short-seller Hindenburg Research accuses the AI darling of 'accounting manipulation'

• Super Micro Computer stock fell after Hindenburg accused the firm of "accounting manipulation."
• The short-seller said it conducted a three-month investigation and spoke to former insiders.
• Super Micro shares slumped more than 5% on Tuesday but remain up 89% for the year.

Super Micro Computer stock tumbled on Tuesday after Hindenburg Research — the famed short-seller that's targeted titans including Carl Icahn and Gautam Adani — accused the AI firm of "accounting manipulation" in a new report.

Hindenburg said it reviewed various instances that suggested there were ongoing bookkeeping issues within the $35 billion tech firm even after the SEC charged it with "widespread accounting violations" in 2020. Super Micro stock declined 5% Tuesday morning, though shares are up 89% year-to-date.

The stock was trading at $553 a share at midday Wednesday, paring its loss to about 1.5%.

"Our 3-month investigation, which included interviews with former senior employees and industry experts as well as a review of litigation records, international corporate and customs records, found glaring accounting red flags, evidence of undisclosed related party transactions, sanctions and export control failures, and customer issues," Hindenburg wrote.

Shortly after paying a $17.5 million fine to the SEC, Super Micro began to re-hire executives who were "directly involved in the accounting scandal," the report said, citing legal records and talks with former insiders.

Three senior employees involved with the accounting scandals later returned to the firm as a board member, the vice president of business development, and a close consultant to the CEO, according to Hindenburg. Howard Hideshima, Super Micro's former CFO, was also hired last year by a "key related party" owned by the brother of Super Micro's CEO, the report said.

Workers within the company said they faced pressure to meet high sales quotas, even after the company was charged by regulators. The high quotas incentivized some workers to issue "partial shipments" or ship defective products by the end of the quarter, former employees told the research firm.

Super Micro's business relationships also appear "oddly circular," Hindenburg said, noting that the company sold parts to various entities, who then assembled them and sold them back to Super Micro.

Some of Super Micro's partners appeared to do little business outside their relationship with Super Micro. Ablecom, one such partner, exported 99.8% of its product in the US to Super Micro, while Compuware, another partner, exported 99.7% of its product to Super Micro, the report said.

Hindenburg also said Super Micro also ramped up exports to Russia after Moscow invaded Ukraine, which violated US sanctions.

Hindenburg highlighted quality concerns among Super Micro's customers, some of whom have turned to alternative suppliers. Tesla and CoreWeave, two of Super Micro's major customers, have inked high-profile deals with Dell over the past year, the firm noted.

Digital Ocean, one cloud provider that worked with Super Micro, also took its business to Dell after the company experienced "service issues," Hindenburg said, with one Digital Ocean employee telling the firm its relationship with SuperMicro was a "train wreck of sorts."

Former employees at Genesis Cloud, a current partner of Super Micro, also described the firms' relationship as "catastrophic."

"All told, we believe Super Micro is a serial recidivist. It benefitted as an early mover but still faces significant accounting, governance, and compliance issues and offers an inferior product and service now being eroded away by more credible competition," the research firm said.

A representative for Super Micro did not respond to a request for comment.

Super Micro stock has soared over the past several years amid Wall Street's hype for AI. However, shares stumbled since the firm missed its earnings estimates in its last quarterly report, fueling a 20% selloff over the past month.

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