Super Micro Delisting Risk Puts $1.7 Billion Bond Repayment On The Line

Super Micro Computer, Inc. (NASDAQ:SMCI) faces possible delisting after its auditor Ernst & Young resigned amid allegations of accounting irregularities and claims of potential export control violations. Adding to Super Micro's woes, the company could face an early repayment on up to $1.725 billion of its bonds if delisted. 

The Details: According to the bonds documentation, holders of Super Micro's $1.725 billion convertible notes due March 2029 have the option of getting their money back early if the shares are delisted from Nasdaq and are not immediately re-listed, re-traded or re-quoted.

Super Micro faces a potential delisting from the Nasdaq if it does not submit its annual report to the SEC by mid-November. 

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However, the company said on its first-quarter earnings call Tuesday that it is working on a compliance plan, which could extend the deadline to submit audited financials to February 2025. 

"We’re diligently looking to replace the auditor as quickly as possible. And we will be filing a plan with Nasdaq and indeed regarding an extension… but that’s all we have to say about that," said David Weigand, Super Micro's CFO. 

An analyst also asked what happens with the company's bank debt and convertible debt if audited financials are not submitted within the prescribed time. 

"We have long-term and good relationships with the banks. And so as necessary, we will file extensions, yes, or get waivers. As I mentioned earlier, we’re not concerned about the company’s ability to access the capital markets," Weigand said. 

According to Super Micro's first-quarter report, the company had about $2.1 billion in cash or equivalents at the end of September. Wedbush analyst Matt Bryson said the company's large cash reserve gives it more options if it needs to restructure its debt. 

Super Micro's delisting and resulting payment on its large sum of debt remains "certainly a risk," Bryson said in an interview, according to Bloomberg. 

SMCI Price Action: According to data from Benzinga Pro, Super Micro Computer shares are down 3.5% at $24.57 at the time of publication Friday. 

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