Super Micro's Short Position Hits Nearly $4 billion Amid 'Very Profitable' Trades In Recent Times: Report

Super Micro Computer, Inc. (NASDAQ:SMCI) has reportedly become the second most shorted in the technology hardware and equipment industry.

What Happened: S3 Partners has found that 22.3% of Super Micro’s floating shares are shorted, a short interest valued at $3.89 billion. According to Ihor Dusaniwsky, S3’s Managing Director, short sellers have augmented their positions by 38% this year, incorporating shares worth $1.1 billion, reported Fortune

"Shorting SMCI has not been a profitable trade for the full year, but recently it has been very profitable," stated Dusaniwsky. In the past month alone, short sellers have added 10.7 million shares, a 10% increase in total shares shorted. Despite a year-to-date loss of $263 million, short sellers managed to earn $7 million in profits in March, marking an 18.2% return.

Meanwhile, on Monday, Super Micro Computer appointed Yitai Hu as General Counsel & Senior Vice President, Corporate Development, following a board recommendation from an independent investigation into management and accounting practices. The move is part of the company's efforts to improve internal functions and ensure continued compliance.

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Why It Matters: Super Micro and CEO Charles Liang are still dealing with the repercussions of their accounting issues, facing multiple lawsuits and investigations from the Department of Justice (DoJ) and the Securities and Exchange Commission (SEC).

Despite the financial challenges, Liang remains hopeful of a turnaround. Super Micro has confirmed its cooperation with the regulators and the company has recently issued financial filings after months of delay, which Liang considers a significant milestone. The firm aims to meet a $40 billion revenue target by 2025.

Super Micro’s current predicament comes on the heels of a downgrade from Goldman Sachs in late March. Analyst Michael Ng downgraded the rating for Super Micro Computer from Neutral to Sell, while reducing the price target from $40 to $32. He cited downside risks on valuation, competition, and gross margins as the reasons for the downgrade. This bearish outlook, coupled with the company’s ongoing accounting issues, has likely contributed to the surge in short interest.

Super Micro Computer stock rose 2.37% to close at $35.05 on Tuesday. The stock lost nearly 17% over the past 6 months.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.