Super Micro Computer, commonly known as Supermicro, is going through one of the most controversial periods in its more than 30-year history this week, thanks to two key events. The first is the news that the Department of Justice (DOJ) is investigating the AI server company's accounting practices. The second is the upcoming stock split.
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Speaking of which, Supermicro (Nasdaq:SMCI) shares fell more than 12% yesterday after news emerged of the alleged Justice Department investigation. Here's what you need to know.
Ministry of Justice investigation
The most troubling news for Supermicro this week has yet to come Wall Street Journal I mentioned That the company was under investigation by the Ministry of Justice over alleged accounting irregularities. Neither the Justice Department nor Supermicro have confirmed the investigation, which the Wall Street Journal says is in its early days.
We have reached out to Supermicro for comment.
As for why the Justice Department is launching an investigation, it likely has something to do with the Hindenburg research a report On Supermicro from late August. Hindenburg Research is an active short selling investment firm. The company claimed in its report that, throughout its three-month investigation, it found “blatant accounting red flags,” as well as sanctions, export control failures, and evidence of undisclosed transactions with related parties.
After the Hindenburg report was published in late August, SMCI shares fell from a high of $557 on August 27 to close at just over $443 on August 28, a decline of about 20%.
With yesterday's news of a potential DOJ investigation, SMCI shares fell another 12%. As of the time of this writing, SMCI shares are currently trading down about 1.6% pre-market at about $396 per share.
SMCI stock split
While all this is happening, Supermicro's stock is scheduled to split next week. The company announced the stock split back in early August — nearly three weeks before the Hindenburg report.
It's a 10-for-1 split, which means that after the split, there will be 10 times as many SMCI shares as there were before the split, but each share will be worth one-tenth of what was previously split.
The division is scheduled to take place after the closing bell on Monday, September 30. On Tuesday, October 1, SMCI shares will begin trading at the post-split price.
Typically, when a stock is only a few days away from splitting, it is very easy to estimate the approximate price at which the split shares might begin trading. But with news of a potential DOJ investigation, SMCI stock could be volatile from time to time.
But let's say SMCI shares are trading around their current price of around $400 on Monday; This means that on Tuesday morning, the adjusted price of SMCI shares will be around $40 per share.
Supermicro's AI server solutions are used in companies in industries as diverse as healthcare, retail, and manufacturing.
This post originally appeared on fastcompany.com
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