Needham suspended the firm’s rating on Supermicro (SMCI) shares after the company issued an 8-K disclosing that Ernst & Young LLP has resigned as the company’s registered public accounting firm. Not only does Ernst and Young’s resignation “raise considerable questions about the validity of Supermicro’s current and past financial statements but it also raises significant questions about Supermicro’s corporate governance and management’s commitment to integrity and ethical values,” the analyst tells investors. The firm, which previously had a Buy rating on the shares, believes Ernst & Young’s resignation will likely bolster the Justice Department’s investigation into Supermicro, which carries its own risk, and sees increased default risk associated with the company’s Term Loan Agreement with Bank of America (BAC), the analyst added.
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