Targeted by the well-known short seller Citron Research! Super Micro Computer opened on Tuesday with a sharp drop of 8.7%

Super Micro Computer Inc. (Super Micro Computer Inc.) opened on Tuesday with a sharp drop of more than 8.7% in US stocks. Prior to this, the well-known US short-selling firm Hindenburg Research stated that it was shorting Super Micro Computer, claiming that the server manufacturer had "accounting manipulation" issues.

According to media reports, Hindenburg Research's investigation into Super Micro Computer includes interviews with former senior employees and litigation records. The investigation believes that the company has "obvious accounting issues, undisclosed related party transactions, sanctions and export control failures, as well as customer issues."

The report states:

"Super Micro Computer has benefited greatly from its first-mover advantage, but still faces significant accounting, governance, and compliance issues, with poor product and service quality being eroded by more credible competitors."

The report points out that Super Micro Computer has a certain track record of accounting issues. In 2018, Super Micro Computer was temporarily delisted from Nasdaq for failing to submit necessary financial statements. Subsequently, the US Securities and Exchange Commission (SEC) accused the company of "widespread accounting violations related to improper revenue recognition and expense underestimation totaling over $200 million," leading to inflated sales, revenue, and profit margins. Hindenburg noted that less than three months after reaching a $17.5 million settlement with the SEC, Super Micro Computer began rehiring executives involved in the previous scandal.

Hindenburg's report further claims that shortly after settling with the SEC, Super Micro Computer resumed behaviors such as "improper revenue recognition," "recognizing incomplete sales," and "circumventing internal accounting controls." The report suggests that sales quota pressure led to problematic behaviors such as "partial shipments" and shipping defective products. Former employees report that the company's internal culture has not improved since the SEC charges.

Transactions between Super Micro Computer and related parties have also sparked controversy. The report states that the relationships between disclosed and undisclosed related parties involving Super Micro Computer are suspicious. Disclosed related party suppliers Ablecom and Compuware, companies controlled by CEO Liang Jianxun's brothers and partially owned by Liang Jianxun himself, have received $983 million from Super Micro Computer in the past three years. These entities provide components to Super Micro Computer, which are then resold back, raising concerns about circular transactions and accounting integrity.

The report also reviews Super Micro Computer's latest investments and contracts. In February 2024, Super Micro Computer made an undisclosed investment in the tech startup Lambda Labs and signed a $6 billion California data center leasing contract, subleasing space to Lambda. In addition, undisclosed investments and transactions with other companies by Super Micro, including Leadtek and a Turkish shell company, have also raised alarms.

Furthermore, concerns about Super Micro Computer's compliance with US export restrictions are increasing. Despite the company's claim to have stopped selling products to Russia after the Russia-Ukraine conflict in February 2022, data shows a significant increase in the quantity of high-tech components exported by the company to Russia, while many companies handling Super Micro products are now subject to US sanctionsIn addition to these issues, the report also highlights the challenges Super Micro faces in maintaining key partnerships. NVIDIA, as a major chip supplier, publicly supported Dell, a competitor of Super Micro, in May 2024. CoreWeave and Tesla, once important customers of Super Micro, have shifted their business to Dell, further impacting Super Micro's market position.

Following this announcement, Super Micro's stock fell by 8.7% at one point, but narrowed to around 1.5% during trading. Super Micro has not immediately responded to requests for comments.

Despite a more than 55% decline from its peak of $1229 in March, Super Micro's stock price has still risen by over 80% this year.

Media reports indicate that the company's stock has become a popular choice among AI investors due to strong demand for devices supporting artificial intelligence software, such as servers manufactured by Super Micro. The close relationship between Super Micro and chip giant NVIDIA allows the company to capitalize on the surge in demand for AI servers, with Super Micro being known for its liquid cooling technology for high-power semiconductors.

Despite the revenue surge, Super Micro's profit margin has recently been impacted by rising server production costs and price pressures from competitors including Dell.

Analysts have pointed out the company's high spending on supporting next-generation AI chips (including chips sold by NVIDIA). Analysts believe that Super Micro's stock has also come under pressure in recent months as investors increasingly worry about large tech companies cutting back on AI spending due to slow returns on investment.

Hindenburg has been at the forefront of short-selling attacks over the past year, shaking several well-known companies and causing stock plunges for Indian conglomerate Adani Group and investment firm Icahn Enterprises