Tech giant Super Micro Computer, also known as Supermicro, saw a 15% decline in its shares, leading the S&P 500 losers on Thursday. This follows reports that the U.S. Department of Justice (DOJ) is scrutinizing the server manufacturer over potential accounting malpractices and other violations.
The Wall Street Journal reported that the investigation was triggered by Hindenberg Research, a prominent short seller, alleging last month that it discovered fresh proof of accounting tweaking, undisclosed related party transactions, sanctions breaching, and client problems at Supermicro.
The investigation is reportedly in its infancy, with a prosecutor from the U.S. attorney's office in San Francisco reaching out to individuals who may have relevant information. The inquiry seems focused on allegations from a former employee who filed a whistleblower lawsuit against Supermicro and its CEO, Charles Liang, earlier this year, accusing them of improper financial accounting.
In an interesting development last month, Supermicro postponed the release of its annual report, citing the need for additional time "to finalize its assessment of the design and operational effectiveness of its internal controls over financial reporting as of June 30, 2024."
The company, whose shares reached a record high in March, attributed its success to the rise of artificial intelligence (AI). Although the firm has lost some ground since, it remains up by 38% in 2024. Supermicro did not respond to a request for comment from Investopedia.