Short Sellers Rejoice On Report Of Supermicro DoJ Probe

Comment Supermicro has reportedly fallen under the scrutiny of the US Justice Department amid allegations the US-based server vendor is cooking its books.

According to a Wall Street Journal report citing unnamed sources familiar with the matter, the Department of Justice recently launched a probe into Supermicro's accounting practices.

Reports that prosecutors for the US attorney's office were searching for evidence to support a case against Supermicro sent the company's shares into free fall on Thursday with prices plummeting over 16 percent.

There have certainly been no shortage of red flags raised in recent months to arouse investigators suspicions. The alleged inquiry, which is apparently in the very early stages, comes after former Supermicro employee Bob Luong filed a whistleblower lawsuit against the system builder claiming it had misreported revenues by booking sales and billing customers on incomplete orders.

In the wake of the lawsuit, activist short-seller Hindenburg Research released a report claiming to have uncovered additional evidence of accounting manipulation and other unscrupulous behavior by Supermicro and its leadership.

CEO Charles Liang has since refuted these allegations claiming the report "contains false or inaccurate statements," the WSJ reported.

Despite Liang's denial, it wouldn't be the first time that Supermicro's accounting practices have landed him in hot water. Back in 2020, the Securities and Exchange Commission charged Supermicro with "widespread accounting violations." The company later paid $17.5 million and settled the case without admitting wrongdoing.

Further complicating the matter is that Supermicro is nearly a month late in releasing its 10-K annual report. The firm initially delayed the release to sort out some accounting issues.

In a statement to El Reg, the Department of Justice said it could neither confirm or deny the existence of the investigation. Supermicro did not immediately respond to a request for comment.

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Supermicro isn't the only company that has seen its shares tank on spooky reports of investigations in recent weeks. Earlier this month, Bloomberg citing unnamed sources, reported that the DoJ had stepped up its investigation into Nvidia and had issued subpoenas seeking evidence to build its case against the chip biz. The GPU giant later denied having ever received them, but not before the report triggered a sell off of Nvidia shares.

Regardless of whether the DoJ really is poking its nose into Supermicro's business or not, with its share price in free fall, we can't help but notice that its short sellers who have the most to gain from the chaos. Just sayin'. ®