Super Micro Computer (SMCI), a leader in semiconductor technology, officially joined the growing trend of tech companies executing stock splits. The company announced a 10-for-1 stock split, which took effect after the market closed on Monday.
This means shareholders will now hold 10 shares for every one they previously owned, with the total value of their holdings remaining unchanged.
The move is designed to make Super Micro’s stock more affordable for retail investors by lowering the per-share price.
The post-split trading began on Tuesday, with shares adjusted to $41.64, down from Monday’s closing price of $416.40.
Stock splits like these are increasingly common in the tech industry, and Super Micro follows in the footsteps of other major semiconductor companies such as Nvidia and Broadcom, which also executed stock splits earlier this year.
Stock splits: A growing trend in the semiconductor sector
Semiconductor companies have experienced tremendous growth in 2023, and many, like Super Micro, are turning to stock splits to attract more retail investors.
The practice doesn’t change the actual value of a shareholder’s investment but lowers the stock price to make it more accessible to smaller investors.
The idea is that a lower price per share might encourage more purchases, increasing liquidity in the stock.
Super Micro’s stock split mirrors moves made by Nvidia, which split its stock on June 7, and Broadcom, which split on July 12. Both companies saw modest gains in the wake of their splits, with Nvidia up 0.4% and Broadcom gaining 1.5%.
Lam Research is also preparing for a stock split, scheduled for Wednesday.
However, despite the excitement around these stock splits, Super Micro faces a series of challenges.
Its stock is down 65% from its record high of $1,188.07, which it reached on March 13.
Much of the decline came after the company reported lower-than-expected profit margins for its fiscal fourth quarter and faced serious allegations from short-seller Hindenburg Research.
Super Micro battles allegations and delayed filings
On August 7, Super Micro released its fiscal fourth-quarter earnings report, revealing an adjusted gross profit margin lower than the previous year.
Soon after, on August 27, Hindenburg Research published a report accusing the company of “glaring accounting red flags,” undisclosed related party transactions, and failures related to export controls and customer issues.
The report raised significant concerns about the company’s transparency and governance.
Super Micro quickly responded, delaying the filing of its annual 10-K report for the fiscal year that ended on June 30. The company also denied the allegations made by Hindenburg, describing them as false or inaccurate.
Super Micro assured investors that, despite the delayed filing, no significant changes to its fourth-quarter or fiscal year 2024 results were expected.
The challenges facing Super Micro escalated when The Wall Street Journal reported on September 28 that the US Department of Justice had opened an investigation into the server maker, following the claims made in the Hindenburg report.
At the time of the report, Super Micro declined to comment on the investigation.
Despite these issues, Super Micro stock has still gained 46% so far this year, outperforming the broader market.
By comparison, the S&P 500 has risen 21% during the same period, showing that Super Micro remains resilient in the face of adversity.
A volatile path ahead
The 10-for-1 stock split comes at a crucial time for Super Micro as it attempts to recover from the recent allegations and restore investor confidence.
The stock split aims to make the shares more attractive to individual investors, potentially driving demand.
However, the ongoing investigation and the lingering impact of the Hindenburg report mean that the company’s stock could continue to experience volatility in the near future.
While semiconductor companies have enjoyed strong performance overall, Super Micro’s recent troubles have put it under a spotlight.
Investors will be closely monitoring the company’s forthcoming financial reports and updates on the Department of Justice investigation to gauge the long-term viability of their investments.
Super Micro’s strategy of stock splitting, despite the current challenges, shows its confidence in continued growth and its efforts to retain investor trust.
The company has said that it expects no significant changes to its financial results and that it remains focused on its core business of providing cutting-edge technology in the semiconductor space.
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