The share price of Super Micro Computer (NASDAQ: SMCI) plunged 15% in pre-market trading on December 16 as investors reacted to news regarding the company’s future on a major stock index.
Specifically, ahead of the market opening, SMCI was down 15.02%, trading at $30.98. At the close of the last session, the artificial intelligence stock traded at $36.45, down over 3% for the day, while in 2024, SMCI remains up 27% year-to-date.
Why SMCI is crushing
SMCI stock is plunging after it emerged that the company was being removed from the lucrative Nasdaq-100 Index, a development that will take effect on December 23, 2024.
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The removal is part of the Nasdaq’s annual index reconstitution, which saw the addition of high-flying software stock Palantir Technologies (NASDAQ: PLTR), MicroStrategy (NASDAQ: MSTR), and Axon (NASDAQ: AXON).
Besides Super Micro, Moderna (NASDAQ: MRNA) will also be axed from the index.
This is an unwelcome development for the company, which has faced a challenging 2024 triggered by accounting concerns and the firm’s financial health.
Operating outside the index could reduce visibility, institutional interest, and stock momentum, making it less appealing to new investors. Additionally, this move may lead to lower liquidity and increased volatility, as stocks in major indices typically enjoy higher trading volumes.
SMCI’s recovery path
Meanwhile, SMCI, which initially faced the threat of being delisted from the Nasdaq exchange, is now taking measures to recover after delaying filing its financials.
Reports indicate that the information technology firm is exploring ways to strengthen its finances by raising new capital, potentially through selling more shares and bonds. The company has hired investment bank Evercore to assist with the process.
In July, Ernst & Young raised concerns about Supermicro’s governance and financial reporting controls, prompting the board to form a special committee.
Indeed, the latest blow comes after investors had expressed optimism about the stock’s recovery after an internal probe found no evidence of wrongdoing in its delayed filings. Notably, SMCI has yet to publish the required accounts, but it has until late February 2025 to do so or risk being kicked out of Nasdaq.
Supermicro is already shaking up its internal leadership to return the company to its former glory. For instance, Kenneth Cheung, former VP of Finance, was recently appointed as the new Chief Accounting Officer, with plans to fill the roles of General Counsel, Chief Compliance Officer, and CFO.
While these developments are positive, a high degree of uncertainty remains, as these measures have yet to bear fruit.
Featured image via Shutterstock
