NOTE TO EDITORS: The Following is an Investment Opinion Issued by Spruce Point Capital Management
Warns Investors That an Investment in Super Micro Entails Elevated Risks Due to the Company’s Documented History with the SEC for “Widespread Accounting Violations” Tied to Revenue and Expense Recognition
Examines New Areas of Concern Around Financial Reporting Tied to Borrowings and Observes Evidence of Rising Financial Strains in its Business
Identifies Super Micro’s Growing Dependence on Facebook (Meta Platforms) and Other Large Customers as a Major New Risk
Cautions Investors Not to Put Undue Reliance on Super Micro’s Bold Revenue Claims and Flags That the Company Has a Poor History of Converting Revenue to Cash
Believes That Super Micro’s Valuation Expansion is Unwarranted in the Face of Growing Risks, Heavy Stock Sales by its CEO and CFO, and a Slowdown in Technology Hardware Spending
Sees 40% to 50% Downside Risk to SMCI’s Share Price and Urges Investors to Visit www.SprucePointCap.com and Follow @SprucePointCap on Twitter for the Latest on $SMCI
Spruce Point Capital Management, LLC (“Spruce Point” or “we” or “us”), a New York-based investment management firm that focuses on forensic research and short-selling, today issued a detailed report entitled, “Micro And Macro Issues At Super Micro Computer” that outlines why we believe shares of Super Micro Computer, Inc. (NASDAQ:SMCI) (“SMCI” or “Super Micro” or the “Company”) face up to 40% to 50% downside risk, or $42.39 – $50.86 per share. All figures referenced are in US Dollars, unless otherwise specified. Download or view the report by visiting www.SprucePointCap.com and follow us on Twitter @SprucePointCap for additional information and important updates.
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Spruce Point Report Overview
Based in San Jose, California, Super Micro is a technology hardware provider of predominantly server and storage systems. The Company has a history of financial challenges that have resulted in financial restatements, its stock being delisted and charges for “widespread accounting violations.” As we outline below, Super Micro is also amplifying the risks for its shareholders by targeting larger customers such as Facebook and by pursuing wildly optimistic revenue targets with an unjustifiable ‘growth at all costs’ mentality. Key findings from our report include:
A long and documented history of accounting violations, most recently settling charges with the SEC in 2020. Super Micro was fined $17.5 million by the SEC and its Founder and CEO Charles Liang was ordered to return $2.1 million of profits from stock sales during a period in which financial results had to be restated. In its report on the Company, the SEC stated that Super Micro’s executives, “pushed employees to maximize end-of-quarter revenue and minimize expenses, without devising and maintaining sufficient internal accounting controls to record revenue and expenses in conformity with U.S. Generally Accepted Accounting Principles …
