As we know, this stock halfed during last two months due to fake financial and delisting and DOJ investigation.
My gut feeling is that this company would not be bancrupt, but it may be delisted from Nasdaq for quite a while. So I am thinking to bet to buy the stock at low price and bet it would rebound.
First, i took a look at the short sell report by hindenburg research, which is very detailed about potential problems of the company.
https://hindenburgresearch.com/smci/
This kind of opportunity is hard to handle. Although the company has previously audited income statement, but it is skeptical how reliable this income statement would be. I did take a look at its income statement. Assuming their income statement is oversated. I did some adjustment to its revenue and net income. Then I carry out their financial forecast and did DCF model to calculate the firm's total equity value. Then I deducted the value by potential fines from SEC and other US department(assuming total 200million USD fines). I come to the theoritical long term value for SMCI is about USD68-99 per share. Currently its share is trading around USD18. So the company may be undervalued.
However, given the potential risk of fines and lawsuits and lost of reputation, I would put a buy order for this company below current price, at USD10 level.
Let's see how trading would playout.
Continue:
Market developments:
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2024.10.30 Ernst & Young resigned as auditor of SMCI, SMIC down by 32% to USD33
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2024.10.31 Fear of delisting by Nasdap, investor continue to dump SMCI, SMIC down by 12% to USD29
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2024.11.1 Tianfeng Securities said SMCI may face the worst result to be delisted, SMIC down by 11% to USD26
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2024.11.6 SMCI Q2 25 guideline missed expectation, SMCI down by 18% to USD22
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2024.11.13 SMCI postponed submit 10-Q report due to lack of auditor and said need more time to find auditor. SMCI down by 6% to USD20.33
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2024.11.15 SMCI promised it will find neew qualified auditor and prevent from delist. SMIC up by 3% to USD18.58
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2024.11.18 SMCI find proper auditor as BDO, SMCI up by 16% to USD21.54
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2024.11.19 SMCI filed compliance plan to Nasdaq, SMCI up by 31% to USD28.27
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2024.12.02 Independent auditing committee issued their investigation result and claimed their didn't find any wrongdoing. SMCI up by 28% to USD42.
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2024.12.6 Nadaq permited SMCI to continue its trading till 2025 February, SMCI up by 6% to USD43
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2024.12.9 There is rumors said SMCI maybe dumped by Nadaq 100 index and incurs massive sales by index funds. SMCI down by 8% to USD40.5 (bought)
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2024.12.11 SMCI CEO David Liang said he is confident that company will not be delisted by Nasdaq. SMCI down by 5% to USD38
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2024.12.16 SMCI was kicked out by Nadaq 100 index and incurs massive sales by index funds. SMCI down by 8% to USD33
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2025.2.12 SMCI said the new auditor BDO is fully engaged in completing the Audit process. SMCI is confident that they will fill the 10k and 10Q on Feb 25, 2025 on time. SMCI is also managed to issue a new convertable bond for 700mn USD. SMCI up by 7.33% to USD41.44 in after trading period.
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TBC
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My investment decision:
2024.11.13:Company said they would need more time to find auditor. I keep my purchasing price at USD10
2024.11.19: Given it submitted the compliance plan to Nasdaq, I would raise the purchasing price to USD18 level.The market price is USD28.7
2024.12.16: Given SMCI is kicked out by Nasdaq 100 index and there are potential liquidity issue for SMCI, I would decrease the purchasing price to USD29.5. The marekt price is USD33.44
2025.2.12 Given SMCI is able to issue new convertable bond, I would raise the purchasing price to USD30. The market price is about USD41.44
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