After Adani, Hindenburg accuses this IT giant of accounting fraud
Hindenburg Research, a US-based renowned investment research firm and short-seller, has published a report accusing Super Micro Computer Inc. of alleged accounting manipulation and sanctions evasion. The Silicon Valley-based company's shares experienced an almost 8% drop on August 27 following the release of this report. However, by the end of trading day, they had managed to recover some losses, closing down by only 2.6%.
Hindenburg's investigation reveals potential irregularities at Super Micro
The allegations against Super Micro are based on a three-month investigation conducted by Hindenburg Research. The firm claims to have uncovered "accounting red flags, evidence of undisclosed related party transactions, sanctions and export control failures, and customer issues." These accusations pit Hindenburg against the IT giant and server manufacturer that has significantly benefited from the generative artificial intelligence boom.
Super Micro's past accounting violations and SEC charges
Super Micro has previously faced scrutiny for its financial practices. In 2018, the company was temporarily delisted from Nasdaq due to its failure to file financial statements. The US Securities and Exchange Commission (SEC) later charged Super Micro with "widespread accounting violations" related to over $200 million in improperly recognized revenue and understated expenses. These alleged irregularities led to inflated sales figures, earnings, and profit margins.
Hindenburg alleges rehiring of executives involved in accounting scandal
Hindenburg's report also suggests that Super Micro re-employed executives implicated in the accounting scandal, just three months after a $17.5 million SEC settlement. The research firm cites litigation records and interviews with former employees to support this claim. Howard Hideshima, a former CFO of Super Micro who was charged by the SEC with accounting violations after leaving the company, was reportedly rehired by an entity closely associated with Super Micro CEO's brother.
Hindenburg highlights potential related party transactions at Super Micro
The research report also draws attention to potential related party transactions within Super Micro. It alleges that two suppliers controlled by Super Micro CEO Charles Liang's brothers received payments totaling $983 million over the past three years. One of these entities is partially owned by Liang and his wife. These companies reportedly assemble and sell components back to Super Micro, and lease warehouse and factory space to it, despite Super Micro owning its own factory facilities.
Hindenburg alleges Super Micro's violation of US export bans
Hindenburg's report further alleges that Super Micro violated US export bans by shipping high-tech components to Russia. The firm claims these exports have tripled since the Ukraine war began, based on a review of over 45,000 import/export transactions. This is not the first time Super Micro has faced such accusations; in 2006, it pleaded guilty to a felony count for exporting banned components to Iran.
Super Micro's business relationships and Hindenburg's disclosure
Hindenburg's report also discloses that NVIDIA is a key partner and chip supplier to Super Micro. In 2023, Tesla exclusively sourced its servers from the company. However, due to accounting issues and quality concerns, some major companies have either completely severed ties with Super Micro or reduced their business dealings with them. Hindenburg has disclosed that it has taken a short position in shares of Super Micro Computer following these findings.
