$Super Micro Computer (SMCI.US)$ Once a popular AI stock, but since hitting a record high in March this year, the situation has taken a sharp downturn. Investors are starting to worry whether the company will be delisted from NASDAQ and removed from the s&p 500 index constituents.

Currently, Super Micro Computer is facing multiple troubles, with the stock price plummeting over 75% since March. The company will release its earnings report post-market trading on Tuesday this week. Options data indicate that traders believe the stock price will experience up to a 20% fluctuation after the company updates its financial report. The market is most concerned about how Super Micro Computer will prove its compliance with Nasdaq's requirements after auditing firm Ernst & Young resigned last week.

Ernst & Young expressed doubt about the integrity and ethical commitments of Super Micro Computer when resigning last week. The U.S. Department of Justice had previously launched an investigation into the company, and there was also a negative short sell report earlier this year.

Due to Super Micro Computer's failure to submit its annual 10-K report by the August deadline, its listing on Nasdaq is in jeopardy. Nasdaq requires the company to submit a plan to regain compliance by mid-November. If this plan is approved, the deadline may be extended to February 2025. However, Ernst & Young's resignation has made this process more complicated.

Wedbush analyst Matt Bryson said in an interview:

"I think they may eventually go private, mainly because time is running out. How can they produce a 10-K report in just a few months? There is no auditing firm now, and the previous audit firm has resigned."

Earlier this year, super micro computer's stock performed well due to strong demand for high-performance datacenter servers driven by artificial intelligence, leading to its inclusion in the S&P 500 index. However, as issues continued to arise, investors started withdrawing funds. Firstly, due to the delayed submission of the 10-K report, followed by former employees accusing the company of inflating revenue, regulatory authorities also began investigations. When Ernst & Young resigned, super micro computer stated that they do not believe this issue will lead to restatements of previous financial reports and have started looking for a new auditing firm.

Some analysts are skeptical about the future of super micro computers. Last week, Needham's analyst team stated that they temporarily suspended the analysis of super micro computer stocks because they believe that if the company hires a new audit firm, the previous financial statements may need to be restated.

Bloomberg analyst Jin Ho also mentioned that if super micro computer is delisted from Nasdaq, it may be removed from the S&P 500 index, leading fund companies to sell their holdings in super micro computer stocks. Currently, approximately 24% of super micro computer stocks are held by passive funds, while 8% are held by funds related to the S&P 500.

This is not the first time super micro computer has been delisted. In 2019, the company was delisted from Nasdaq for not timely submitting its annual 10-K report and multiple quarterly reports. In 2020, it was approved for relisting. That same year, super micro computer resolved accounting issues with the US Securities and Exchange Commission by paying a $17.5 million fine, without admitting or denying the regulatory agency's allegations during the settlement process.

Bryson pointed out that after the last delisting of super micro computer, the company's growth stalled for two years. He added that customers might feel uneasy due to financial issues, which could affect the company's ability to deliver products on time. Jin Ho agreed, suggesting that with increasing competitors, super micro computer might lose some orders, benefiting Dell Technologies as customers may shift towards Dell's products.

Editor/Lambor