Super Micro Computer's stock surged by almost 30 percent Monday after an internal review committee cleared the company's leadership of alleged fraud or misconduct.
The investigation, launched after Ernst & Young (EY) resigned as Super Micro's auditor in October, was prompted by concerns over governance, transparency, and financial controls.
A committee composed of board members and external counsel––attorneys from Cooley LLP and accounting firm Secretariat Advisors––determined that the allegations cited in EY's resignation were "not supported by the facts," Super Micro announced Monday.
As a result, the company does not anticipate revising its financial reports.
Future plans include hiring a general counsel and a number of in-house attorneys "commensurate for a company of Supermicro's size and complexity, particularly in light of its recent rapid growth and future growth ambitions," the server manufacturer said in the statement.
EY Flagged Governance and Transparency
EY––one of the accounting world's 'Big Four' companies––commenced auditing Super Micro earlier this year.
In August, Super Micro's stock plummeted by 25 percent after the company delayed filing its annual report, citing the need for additional time to assess internal financial controls.
The London-based firm's announcement came a day after Hindenburg Research accused the company of accounting manipulation. It labeled their practices as "glaring accounting red flags" and said it found evidence of undisclosed transactions, leading to a short position against Super Micro. It also accused Super Micro of rehiring top executives directly involved in a 2018 scandal.
EY's resignation two months later cited similar concerns about transparency and management integrity.
Super Micro denied the allegations, describing them as "rumors and speculation."
BDO was later appointed as its new independent auditor last month.
CFO Held Responsible for Weak 'Guardrails'
Following these developments, the U.S. Department of Justice initiated a preliminary investigation into the company's accounting practices.
A thorough investigation found that the decisions to rehire were "the product of reasonable business judgment."
Super Micro revealed it is seeking a new chief financial officer (CFO) to replace David Weigand, who will remain in the role until a successor is named. The investigation suggests Weigland held "primary responsibility" for not always ensuring "guardrails were always in place and observed."
However, they maintain no lapses in judgment "resulted from bad faith, improper motives, or lack of regard for accurate financial reporting or compliance."
In a move to strengthen its accounting operations, Super Micro promoted Vice President of Finance and Corporate Controller Kenneth Cheung to chief accounting officer.
AI Boom Sustains Super Micro Stock
Despite recent setbacks, Super Micro reported fourth-quarter revenue of $5.31 billion in August, a 143 percent increase from the same period in 2023, driven by demand for artificial intelligence.
As the company continues expanding its AI server offerings, which are expected to play a pivotal role in powering next-generation data centers, it also faces pressure to resolve lingering reputational concerns.
Right now, its NASDAQ price is $42, a world away from its earlier November 14 low of a little over $18.
This article includes reporting from The Associated Press.
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