Super Micro Computer has offered up a belated annual financial report for fiscal 2024 and quarterly filings for the first and second quarters of fiscal 2025 to investors months after they were due, and the Silicon Valley tech giant is claiming that former accounting firm EY is to blame for its tardiness.
The server and storage provider, which counts Nvidia as a partner and includes its prized graphics processing units in its servers, is closely watched due to its rise to the Fortune 500 and its adjacency to Nvidia. Super Micro was the subject of a short report from Hindenburg Research in August, and soon after announced that it would delay filing audited financials to investors, sending the stock into a tailspin amid media reports and scrutiny. The company secured an extension from Nasdaq to file its annual financial and quarterly reports, and hit the deadline on Tuesday. In them, the company acknowledged weaknesses in its internal controls over financial reporting and noted that it amended the terms of its convertible debt due to the delay. Super Micro’s interest rate rose to 3.5% as a result.
“Today’s filings represent an important milestone,” said CEO and founder Charles Liang in a statement. Liang said the company will now fully focus on the business at hand and a revenue target of $40 billion.
That might be easier said than done. Since August, the company and Liang have been hit with at least five lawsuits in various courts in Canada and California—where the company is headquartered—due to the delay. In late 2024, the Department of Justice and the Securities and Exchange Commission both subpoenaed the company for a wide range of documents related to the allegations in the Hindenburg Report. Super Micro said it is cooperating with the probes.
EY in July 2024 told the board’s audit committee—a group of independent directors on the board—that it was concerned about the governance, transparency, and internal controls over Super Micro’s financial reporting. In auditor speak, this was a significant red flag going up to the corporate board, which has the power to hire, fire and influence the CEO. In response to EY’s concerns, Super Micro brought in an independent law firm, Cooley, and forensic accounting firm Secretariat Advisors to investigate the issues EY raised. Super Micro stated the costs of the investigation have already reached $18.6 million.
After the investigation, EY resigned as Super Micro’s independent public accounting firm, setting off a stock selloff and raising significant questions as to whether Super Micro might be suspended by Nasdaq. For its part, Super Micro disagreed with EY’s resignation and said its independent review did not give rise to substantial concerns about the integrity of senior management. Super Micro appointed BDO USA as its accounting firm in November 2024. The company pointed the finger at EY for the delinquent reports.
“Due to EY’s stated concerns and subsequent resignation, we were unable to timely file our Annual Report and Quarterly Reports on Form 10-Q for the quarterly periods ended September 30, 2024 and December 31, 2024,” the company said in its report on Tuesday to investors.
EY did not respond to a request for comment.
The annual financial report lays out Super Micro CEO Liang and his wife Sara Liu Liang’s extensive dealings with family members and their businesses through Super Micro.
Ablecom, a Taiwan corporation, is one of Super Micro’s major contract manufacturers. A second Taiwan company, Compuware, is a distributor of its products. Ablecom’s CEO, Steve Liang, is the brother of Super Micro CEO Charles Liang. Steve Liang and his family owned 35% of Ablecom’s stock and Charles and Sara Liu Liang owned 10.5% of Ablecom’s stock. Bill Liang, brother to Charles and Steve, is the CEO of Compuware and a member of the board at Ablecom. Meanwhile, Steve Liang is also a member of Compuware’s board. Finally, a sibling of Yih-Shyan (Wally) Liaw, is senior vice president of business development at Super Micro, and owns 11.7% of Ablecom’s stock and 8.7% of Compuware’s stock.
In October 2018, Liang had to borrow $12.9 million from his brother Steve’s wife Chien-Tsun Chang because he had to repay margin loans to two banks that he had secured with Super Micro stock after the company was suspended in 2018. As of June 2024, he owed his sister in law is $16.4 million.
The company also provided new details on its dealings with Leadtek Research, which is an authorized reseller of Super Micro. Ablecom and Compuware bought a 30% interest in the Taiwan graphics cards and workstation provider in October 2023. After closing the investment, Steve Liang and Bill Liang served as two of the seven members of Leadtek's board. Since then, Super Micro sold $1.4 million in servers to Leadtek and bought $2.1 million in graphics cards from it.
Super Micro also indirectly sold products from Aeon Lighting Technology through a system integrator. Aeon is 10% owned by James Liang and he serves as the CEO. James is another brother of Charles Liang.
This story was originally featured on Fortune.com
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