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- Spruce Point Capital Management, LLC shared a Strong Sell research opinion on Super Micro Computer, Inc (NASDAQ: SMCI), susceptible to up to 40% - 50% downside risk, or $42.39 – $50.86 per share.
- The SEC penalized SMCI by $17.5 million and urged CEO Charles Liang to return $2.1 million of profits from stock sales that called for a restatement of financial results.
- CEO Liang continued to lead, fueling concerns over lingering accounting problems.
- Spruce Point cautioned against undue reliance on the company's GAAP net income or EPS as a measure of its performance, given its shallow cash flow conversion.
- Spruce highlighted rising financial strains as SMIC shifted focus to larger customers and over-reliance on Meta Platforms Inc (NASDAQ: META) Facebook (NASDAQ:META) as a material customer.
- Facebook's investors have expressed skepticism about its loss-making endeavors in the Metaverse and slowing advertising revenues. Meta's layoffs and investment slowdown in data centers fueled Spruce's concerns.
- Spruce warned against SMIC carrying a significantly higher intra-quarter debt balance or other "hidden" liabilities not accounted for on the balance sheet. SMIC's cash interest expense disclosed at the bottom of the cash flow statement exceeded its reported interest expense on the income statement.
- CEO Liang has sold a record amount of stock. His sales were mirrored by the company's CFO, who recently reduced his stock holdings by 70%.
- Price Action: SMCI shares traded lower by 8% at $77.99 on the last check Tuesday.
| May 2021 | Susquehanna | Maintains | Positive | |
| May 2021 | Northland Capital Markets | Maintains | Outperform | |
| Jun 2020 | Northland Capital Markets | Initiates Coverage On | Outperform |
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