Super micro computer‘s (NASDAQ: SMCI) The stock price closed the daily session down 8.3%. At the same time, Standard & Poor’s 500 (SNPINDEX: ^GSPC) It ended the day up by 0.4%. Nasdaq Composite (NASDAQ: ^IXIC) It ended the session higher by 1.2%.
Supermicro stock fell today following news that the company may look to raise money through equity sales or new debt. It is also possible that the company’s stock price took a hit due to the stock being removed from the market Nasdaq-100 index.
After the market closed on Friday, Bloomberg reported that Supermicro had hired an employee Evercore To help it raise new sources of capital. The server specialist was open to taking out new lines of credit and selling new shares in order to raise money, the report said. Through Evercore, Supermicro is said to be reaching out to private equity firms to gauge potential investment interest. The highly anticipated new fundraising campaign is said to be still in its early stages.
If Supermicro raises cash by selling more shares, it will have a dilutive effect on existing shareholders. Selling new shares means that the company’s capital structure will be divided into a larger number of pieces, and each piece will represent a smaller piece of the overall pie.
Supermicro is taking steps to file its deferred 10-K and prevent itself from being removed from file Nasdaq stock market. If the stock were delisted from the Nasdaq, the stock’s trading volume would decline significantly — and its stock price would likely fall. To add further downward pressure, the stock will be removed from exchange-traded funds (ETFs) that track the Nasdaq and other indices.
Supermicro has managed to avoid this pitfall so far, and says it must file its 10-K with the Securities and Exchange Commission (second) by February 25. But it was unable to prevent its shares from being removed from a separate index.
The Nasdaq 100 is an index consisting of the 100 largest non-financial companies trading on the Nasdaq exchange. Due to recent volatility, Supermicro has been removed from the index and replaced by Palantir Technologies today. As a result of its removal, Supermicro shares will also be dropped from ETFs that track the index. This means that shares are being sold from that money, creating downward valuation pressure for the stock.
While the removal from the Nasdaq-100 does not mean Supermicro will continue to decline in the long term, the stock’s replacement highlights recent challenges facing the company that have yet to be resolved.
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