## Super Micro Faces Major Turmoil as EY Resigns Over Accounting Issues

In a turbulent turn of events, Super Micro Computer Inc., a tech company reveling in the AI boom, is grappling with significant challenges. The Silicon Valley-based company, known for manufacturing high-performance servers that underpin many leading AI models, experienced a spectacular rise over the past five years. Its stock skyrocketed over 3,000%, and its revenue doubled to $7.12 billion, securing it a spot on the Fortune 500 list. However, persistent accounting issues threaten to mar its success story.

Super Micro's troubles came to a head when Ernst & Young (EY), the company's auditor, abruptly resigned. EY's resignation letter, addressed to regulatory authorities, highlighted a lack of reliable cooperation from Super Micro's management and audit committee. The auditing firm expressed agreement with only a limited portion of Super Micro's disclosures while distancing itself from the rest. This dramatic exit sent shockwaves through the financial community, leading to a 33% drop in Super Micro's stock price.

The company's struggles are not new. In 2020, the SEC fined Super Micro $17.5 million for accounting violations occurring between 2015 and 2017. Adding to its woes, acclaimed short-seller Hindenburg Research released a damning report in August 2024, alleging accounting red flags and undisclosed related party transactions. Super Micro vehemently denied these claims, but the damage was done.

Super Micro's embedded family ties further complicate the scenario. Founded in 1993 by CEO Charles Liang, his wife Sara Liu, and Yih-Shyan Liaw, the company has significant family involvement. Various relatives hold crucial positions or have financial ties, raising questions about potential conflicts of interest. For instance, Charles Liang’s brother, Steve Liang, is CEO of Ablecom Technology—a major supplier to Super Micro—with numerous financial transactions between the entities.

The complexity extends to transactions involving Ablecom and Compuware Technology, where familial relationships and intricate financial dealings intertwine. In fiscal 2023 alone, Super Micro bought $167.8 million of products from Ablecom and paid $12.1 million for design services, while Compuware served as a major distributor for Super Micro’s products in key markets.

Despite the embroiled controversies, Super Micro remains defiant. The company formed a special committee, engaging Cooley LLP and Secretariat Advisors to investigate EY's concerns. A company spokesman insisted that no restatements of financials are anticipated, and efforts are underway to appoint a new auditor swiftly.

As Super Micro navigates these treacherous waters, the financial community and regulatory bodies watch closely. A scheduled business update call on November 5th is expected to be a critical touchpoint for investors, though the timing coincides with Election Day, heightening the stakes even further.