AMD CEO Liang Jianhou during the Computex conference in Taipei, Taiwan, Wednesday, June 5, 2024.
Annabelle Chronicle | Bloomberg | Getty Images
super microcomputer It could be kicked out of Nasdaq as soon as Monday.
This is the potential fate of a server company if it fails to submit a viable plan to comply with Nasdaq regulations. Super Micro filed its 2024 year-end report with the SEC late and has not yet changed its accounting firm. When Advanced Micro Devices reported preliminary quarterly results last week, many investors were looking for clarification from the company. But they didn’t understand.
A major component of the plan is how and when AMD will file its 2024 year-end report with the SEC and the reasons for the delay. Many expected the report to be filed alongside the company’s June fourth-quarter earnings, but that wasn’t the case.
The Nasdaq delisting process is a crossroads for AMD, which has been one of the main beneficiaries of the artificial intelligence boom due to its long relationship with artificial intelligence. NVIDIA and a surge in demand for the chipmaker’s graphics processing units.
The former artificial intelligence darling is in shock after a series of bad news. Activist short-seller Hindenburg Research took aim at AMD in August after it failed to file its annual report over the summer, accusing it of accounting fraud and export control issues. The company’s auditor, Ernst & Young, resigned in October, and AMD said last week it was still working to find a new auditor.
The stock is getting hammered. The stock soared more than 14-fold from the end of 2022 to a peak in March this year, before plunging 85%. Super Micro’s shares are currently trading at the same price as in May 2022 after falling another 11% on Thursday.
If AMD fails to submit a compliance plan by Monday’s deadline, or if the exchange rejects the company’s submission, delisting from Nasdaq could ensue. AMD may also get an extension from Nasdaq, giving it several months to comply. The company said Thursday it would provide plans to Nasdaq in a timely manner.
A spokesperson told CNBC that the company “intends to take all necessary steps to comply with Nasdaq’s continued listing requirements as soon as possible.”
While the delisting issue mainly affects stocks, it could also damage AMD’s reputation and standing with customers, who may prefer to simply avoid the drama and buy AI servers from competitors, e.g. Dell or HP.
“Given that AMD’s accounting issues have become more severe since AMD’s quarter ended, its weakness could ultimately Let Dell benefit even more in the next quarter.
A Nasdaq representative said the exchange does not comment on individual companies’ delisting procedures, but rules indicate the process could take about a year before a final decision is made.
Compliance Program
Nasdaq warned Super Micro on September 17 that it was at risk of delisting. The company has 60 days to submit a compliance plan to the exchange, and since the deadline is Sunday, the submission’s effective date is Monday.
If Supermicro’s plan is acceptable to Nasdaq employees, the company would be eligible for an extension of up to 180 days to file its year-end report. Nasdaq wants to know whether AMD’s board of directors investigated the company’s accounting issues, what exactly was the reason for the delay in filing, and a timeline for the board’s action.
Nasdaq said it considers several factors when evaluating its compliance program, including the reason for the delay in filing, upcoming corporate events, the company’s overall financial condition and the likelihood that the company will submit an audit report within 180 days. The review may also look at information provided by external auditors, the Securities and Exchange Commission or other regulatory agencies.
Last week, Super Micro said it was making every effort to maintain its listing on Nasdaq and said a special committee of its board of directors had conducted an investigation and found no wrongdoing. AMD Chief Executive Tony Leung said the company would receive the board committee’s report as soon as last week. A spokesperson for the company did not respond when CNBC asked if it had received the report.
If Nasdaq rejects AMD’s compliance plan, the company can request a hearing before an exchange hearing panel to review the decision. Super Micro will not be immediately removed from the exchange – the hearing panel asked for a 15-day delisting period to begin, and the panel could decide to extend the period by up to 180 days.
If the panel denies the request, or AMD gets an extension but fails to submit updated financial data, the company can still appeal to another Nasdaq body called the Listing Committee, which can grant exceptions.
Ultimately, Nasdaq said the extension was time-limited: 360 days from the date the company’s first late filing was due.
bad record
There is one factor that may affect AMD’s chances of renewing. The exchange will consider whether the company has any history of noncompliance with SEC regulations.
According to the U.S. Securities and Exchange Commission (SEC), between 2015 and 2017, Supermicro misrepresented financial data and delayed the release of important documents. The company delisted from Nasdaq in 2017 and relisted two years later.
Wedbush analyst Matt Bryson wrote in a note that AMD “could be more difficult to obtain an extension as Nasdaq’s documentation indicates that in determining whether an extension is needed it will, in part, consider the company’s specific circumstances, including The company’s past compliance history’. He rates the stock neutral.
History also reveals how long the delisting process can take.
Super Micro Computer Corp. CEO James Liang, right, and Nvidia Corp. co-founder and CEO Jen-Hsun Huang at the Computex conference in Taipei, Taiwan, Wednesday, June 5, 2024.
Annabelle Chronicle | Bloomberg | Getty Images
Supermicro missed its annual report submission deadline in June 2017 and had it extended to December, and eventually held a hearing in May 2018, which was extended again to August of that year. It was only when it missed the deadline that the stock was delisted.
In the short term, AMD’s bigger concern is whether customers and suppliers start to give up.
Compliance issues aside, AMD is a fast-growing company that produces one of the tech industry’s most popular products. Sales more than doubled last year to nearly $15 billion, according to unaudited financial reports, and the company has plenty of cash on its balance sheet, analysts said. Wall Street expects sales to grow further in fiscal 2025, to about $25 billion, according to FactSet.
Supermicro said last week that the application delay “had some impact on orders.” In unaudited September quarter results Reports last week suggested the company was growing slower than Wall Street expected. It also provides light guidance.
The company said one of the reasons for its poor performance was that it had not yet received enough supplies of Nvidia’s next-generation chip, Blackwell, raising questions about AMD’s relationship with its most important supplier.
Melius Research analyst Ben Reitzes wrote: “We don’t think AMD’s issues are a big deal for Nvidia, although it may lose some sales in the near term as customers direct orders to Dell and others. Move from one quarter to the next.
AMD’s head of corporate development Michael Staiger told investors on a conference call last week, “We have spoken with Nvidia and they confirmed that they are not making any changes to allocations. We maintain a strong relationship with them.” .
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