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Short seller Hindenburg Research, known most recently for its long-running feud with Adani Enterprises, set its sights on a well known American target today: Super Micro Computer (SMCI).

Heading into the cash open, shares are lower by about 8%. 

In a report released on its website Tuesday morning, the short seller alleged that the semiconductor/server company, which has seen its stock skyrocket over the last few years during the AI bubble, could be engaged in accounting manipulation and self dealing among family members.

Among other points, Hindenburg wrote:

• Our 3-month investigation, which included interviews with former senior employees and industry experts as well as a review of litigation records, international corporate and customs records, found glaring accounting red flags, evidence of undisclosed related party transactions, sanctions and export control failures, and customer issues.

• Less than 3 months after paying a $17.5 million SEC settlement, Super Micro began re-hiring top executives that were directly involved in the accounting scandal, per litigation records and interviews with former employees.

• A former salesperson told us: “Almost all of them are back. Almost all of the people that were let go that were the cause of this malfeasance.”

• According to a lawsuit filed in April 2024, Super Micro waited only 3 months after the SEC settlement before restarting “improper revenue recognition,” “recognizing incomplete sales,” and “circumvention of internal accounting controls”.

• Even after the SEC settlement, pressure to meet quotas pushed salespeople to stuff the channel with distributors using “partial shipments” or by shipping defective products around quarter-end, per our interviews with former employees and customers.

• One former salesperson described pushing products to distributors based on made-up demand forecasts, completing a partial shipment, then later coming up with an excuse for why the rest didn’t happen. “And now you have a problem. Accounting problem maybe.”

"Beyond fresh questions around its revenue accounting, we found that Super Micro’s relationships with both disclosed and undisclosed related parties serve as fertile ground for dubious accounting," the report says.

"For example, disclosed related party suppliers Ablecom and Compuware, controlled by Super Micro CEO Charles Liang’s brothers, have been paid $983 million in the last 3 years. Ablecom is also partly owned by Super Micro CEO Charles Liang and his wife."

It continues: "The relationships seem oddly circular. Super Micro provides components to the entities which assemble them and sell them back to Super Micro. They also rent warehousing and factory space to Super Micro even though it has its own sprawling factory."

"Multiple former employees and channel partners confirmed that after-sales service is undermining Super Micro’s ability to retain customers. One former salesperson said: 'It’s their Achilles heel. It’s just horrible.'," Hindenburg wrote.

"All told, we believe Super Micro is a serial recidivist. It benefitted as an early mover but still faces significant accounting, governance and compliance issues and offers an inferior product and service now being eroded away by more credible competition," the report says.

You can read the full report here. 

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