Super Micro Computer Shares Extend Weekly Gain as Delisting Risk Wanes

(Bloomberg) -- A roller-coaster ride for Super Micro Computer Inc. shares is likely to continue for some time, as investors weigh the company’s next steps to avoid being delisted by Nasdaq Inc.

Shares of Super Micro Computer Inc. (NASDAQ:SMCI) soared on Friday as investors continue to weigh the company’s next steps to avoid being delisted by Nasdaq Inc.

The San Jose, California-based firm delayed filing its annual 10-K, following a damaging report earlier this year from short seller Hindenburg Research, and has said it would be late with quarterly reports. The company this week said that it believes it can file its delayed 10-K and 10-Q reports in the period available under Nasdaq rules. If accepted, Super Micro would likely get until mid-February to file.

Shares of the server maker rose as much as 13% in early trading Friday, extending its weekly gains to about 78%, putting the company on track for its best week on record. The sharp rebound in shares is the latest twist in a saga that saw the stock hit a record high in March before seeing those gains evaporate amid allegations of accounting and governance issues and filing delays.

The firm’s previous auditor, Ernst & Young LLP, resigned in October, citing concerns over the company’s transparency and governance. Super Micro is also facing a US Department of Justice probe.

Nasdaq must now review and approve the company’s plan, a process that is expected to take about two weeks. If the exchange doesn’t accept the proposal, Super Micro can appeal the decision. Shares will remain listed in the meantime.

Others on Wall Street are more bullish, seeing Super Micro as too important to be delisted and booted from the S&P 500 Index. The company won inclusion in the benchmark gauge in March, further juicing its staggering returns to that point.

“We really think it’s just a complete coin toss right now,” said Larry Tentarelli, chief technical strategist at Blue Chip Daily, of the stock's wild moves. Tentarelli said he previously held shares of Super Micro but sold near the end of July when the stock was in the $80 range.

“I sold because the stock was up so much so quickly that I really didn’t see how it could continue to go up from there and I didn’t want to get caught holding the bag if it went down quickly,” he added.

Representatives for Super Micro and Nasdaq declined to comment.

Bloomberg Intelligence analyst Woo Jin Ho is reserving judgment on whether Super Micro can recover.

“The filing extension gives the company until late February to file the documents, yet the delisting overhang appears likely to persist until it’s compliant,” he wrote. “Given the challenges that Ernst and Young noted working with Super Micro’s board, it’s unclear if BDO will face similar issues.”

Several other analysts aren’t willing to make a call, with at least seven firms suspending coverage on the stock since the end of October, when previous auditor Ernst & Young LLP resigned, according to data compiled by Bloomberg.

While weighing up Super Micro’s prospects, investors also have their eye on competitors. The company’s woes could be a potential boon to rival server makers including Dell Technologies Inc. (NYSE:DELL), Lenovo Group Ltd. (HK:0992) Wiwynn Corp. (TW:3231), Hon Hai Precision Industry Co. (TW:2317) and Pegatron Corp. (TW:4938), according to Bloomberg Intelligence. Dell shares have risen in November while Super Micro slumped.

On the flip side, with the possibility of a Super Micro delisting now reduced, hardware peers such as Dell may “stand in danger of a stock fade,” Lynx analyst KC Rajkumar wrote.

“The company's woes have helped buoy Dell shares in recent weeks, but that could quickly change if Super Micro manages to regain its footing,” Rajkumar added.

Tech Chart of the Day

Bitcoin flirted with a run toward the landmark $100,000 level, buoyed by expectations of friendly US regulations and expanding investor interest courtesy of President-elect Donald Trump’s support for crypto.

Top Tech News

Earnings Due Friday