A new Hindenburg short report alleges Super Micro Computer, Inc. SMCI conducted accounting manipulation, sibling self-dealing and sanctions evasion — but a JPMorgan Chase analyst isn’t buying it.
“As we dig into the details of the report, we believe there to be limited evidence of accounting mistreatments beyond revisiting the 2020 charges from the SEC, and limited new information relative to the existing and already known business relationship with related companies owned by the siblings of the founder of SMCI,” analyst Samik Chatterjee said in a note on Tuesday.
Though the findings are allegedly based on litigation records, company records and interviews with former senior employees, Chjatterjee said the allegations are “tough to verify.”
He also said it is still worth noting the over $200 million in improperly recognized revenue referenced in the report does not change the medium-term revenue opportunity for Super Micro in the $275 billion AI server market expected in 2026 and 2027.
“Net-net, we see the report as largely void of details around alleged wrongdoings from the company that change the medium-term outlook, and largely revisiting the already known areas for improvement in relation to corporate governance and transparency,” Chatterjee wrote.
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“It is not surprising that the company has areas for improvement to further refine governance, transparency and communication with investors, which would be more appropriate for a company of its size following its recent spurt of growth in conjunction with AI server demand; however, the lack thereof does not immediately suggest wrongdoing by the company, in our view.“
Chatterjee said the report suggests Super Micro is conducting similar business practices that led to its delisting in 2018 and SEC charges in 2020 “without any details” and points to several rehires as evidence of a repeat of prior practices “with limited details.”
“Interestingly, evidence about recent culture and practices are based on interviews with former employees in all instances cited in the report,” he wrote.
He noted the business relationship between Super Micro Computer suppliers Ablecom and Compuware, which are owned by Super Micro CEO Charles Liang’s brothers, “are areas where the company has scope for improvement in corporate governance.”
He also pointed out the report highlights evidence of Super Micro shipping to entities in Russia and participating in a joint venture in China.
“While the concerns here are valid and we would expect Super Micro will provide their rationale for treating these relationships as not directly counter to any existing regulations and sanctions, the materiality of the revenue from these regions and partnerships are limited and do not change the growth outlook in the core markets for the company, in our view,” Chatterjee said.
JP Morgan holds an Overweight rating on SMCI, which announced on Wednesday that it was delaying its 10K filing.
SMCI Price Action: Super Micro fell 24.84% to $409.42 by Wednesday at publication.
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