Super Micro Computer Inc (NASDAQ: SMCI) tanked more than 12% again on Monday following a report that it’s considering raising new capital via stock and bond sale.
Stock sales are generally considered a negative for existing shareholders as they dilute their stake in a company.
Plus, such offerings tend to lower a company’s EPS as well.
Why? Because an increase in total number of shares outstanding means earnings will have to be spread over a larger number of shares.
Supermicro stock is now down close to 30% versus it’s recent high.
Why did Supermicro stock gain in recent weeks?
Super Micro Computer plans on raising fresh capital to strengthen its financial stature.
The expected offering will include shares as well as bonds, according to people that talked to Bloomberg on condition of anonymity on Monday.
SMCI itself is yet to comment on the report.
Supermicro has already confirmed that an internal probe did not present evidence of financial malpractice.
It now has until February 25th to file its pending results with the Securities & Exchange Commission that effectively eliminates the risk of delisting.
Still, investors remain wary of SMCI shares as the company is, nonetheless, yet to report its financials.
Therefore, at least some uncertainty still prevails.
And Supermicro stock does not pay a dividend either to calm their nerves in the meantime.
JPMorgan sees downside in SMCI shares to $23
While there have been a few positive developments at Super Micro Computer in recent weeks, analysts at JPMorgan remain bearish on the customised AI server company.
The investment firm sees downside in SMCI stock to $23 that warns of another 25% potential decline from here.
JPMorgan reiterated its “underweight” rating on the artificial intelligence firm last week following a meeting with its management.
The bearish view is particularly interesting considering Supermicro has shunned recent reports that it’s struggling with a material loss of orders.
In fact, the Nasdaq-listed firm is on course to accelerate production at its facility in Malaysia in the back half of its fiscal 2025.
Nonetheless, if Super Micro Computer fails to file before the deadline or ends up significantly revising its previously reported results, its stock price could see another doomsday, according to JPMorgan analysts.
Is Super Micro Computer worth investing?
Note that Super Micro Computer is reportedly exploring if private equity firms are interested in the new shares and bonds it plans on issuing.
But The company’s fundraising initiative is in the early stages at writing and the possibility that it ultimately decides against it remains on the table, as per the Bloomberg report.
If it does proceed with raising new capital to shore up its finances, however, Supermicro stock could see another sharp decline in the coming weeks.
The post Supermicro can’t seem to pull itself together: here’s why it lost 12% again appeared first on Invezz
