**Super Micro at Risk of Delisting, Faces Compliance Challenges**

Super Micro Computer Inc., once a promising name in the artificial intelligence sector, is now grappling with the possibility of being delisted from Nasdaq and removed from the S&P 500. The server manufacturer, whose shares have plummeted over 75% since reaching a peak in March, will provide a crucial business update on Tuesday after market close. Key concerns include meeting Nasdaq’s compliance rules following the recent resignation of its auditor, Ernst & Young LLP. The auditor’s departure was due to concerns over Super Micro's commitment to integrity and ethics, aggravating issues already stemming from a US Department of Justice investigation and a negative short-seller report earlier this year.

Super Micro shares experienced a modest midday gain of 1.2% in New York, after recovering from an initial loss. Options data suggest traders anticipate a 20% movement in the stock, reflecting high volatility ahead of the company’s update. The firm faces a daunting challenge in filing its overdue annual 10-K report, originally due in August. Nasdaq regulations require a compliance plan by mid-November, and if approved, the deadline could extend to February 2025. However, the absence of an auditor complicates swift compliance.

Analyst Matt Bryson of Wedbush expressed skepticism about Super Micro’s ability to meet these tight deadlines without an immediate replacement for Ernst & Young. A delisting would add to the company's already tumultuous year, which began with high hopes due to AI-driven demand for its data center servers and inclusion in the S&P 500. But the unresolved 10-K filing and regulatory scrutiny over alleged revenue inflation have spooked investors.

In response to Ernst & Young’s resignation, Super Micro stated that it doesn't foresee needing to restate previously issued financial reports and is in the process of finding a new auditor. Nonetheless, Needham analysts, led by N Quinn Bolton, have suspended coverage of Super Micro shares, citing significant risks that past financial statements might require restatements once a new auditor is appointed.

A potential Nasdaq delisting may also lead to Super Micro's exclusion from the S&P 500, resulting in institutional investors being forced to sell their shares. Bloomberg Intelligence analysts report that around 24% of the company’s shares are held by passive funds, with 8% linked to S&P 500-related funds.

The situation echoes 2019, when Super Micro was previously delisted for failing to meet report filing deadlines, only earning reapproval in 2020 after paying a $17.5 million penalty to resolve a US Securities and Exchange Commission investigation. Analyst Bryson cautioned that financial instability could deter customers due to concerns over timely product delivery. Similarly, Bloomberg Intelligence's Woo Jin Ho warned of rising risks for order cancellations, noting that competitors like Dell Technologies Inc. might gain from Super Micro’s setbacks.

This year has proven tumultuous for Super Micro, reflecting its struggle to navigate regulatory challenges and maintain investor confidence amidst growing scrutiny.