Super Micro Computer’s 10-for-1 stock split takes place today. Here’s what you need to know:

The big day has come Super microcomputer (SMCI 4.31%). The tech company’s stock split will occur after the market closes, and shares will trade at their new – and significantly lower – price tomorrow. Supermicro joins the list of other high-profile artificial intelligence (AI) stocks such as: Nvidia And Broadcom – who have completed such operations in recent months.

These market giants have introduced splits to make their stocks more accessible to a wider range of investors. Supermicro shares have soared in recent years as the AI ​​boom accelerated, helping drive triple-digit revenue growth. AI customers have flocked to Supermicro for servers, workstations and other products tailored specifically to their data centers. As Supermicro’s shares rose 188% in the first half of the year, even outpacing Nvidia’s earnings and crossing $1,000, investors speculated that a stock split could be next on the agenda. And Supermicro announced a stock split when it announced quarterly results in August.

But unlike rivals Nvidia and Broadcom, Supemicro’s shares did not rise following the decision. That’s because other news weighed on the stock in recent weeks: Hindenburg Research released a brief report claiming there were problems at the company, and Supermicro delayed filing its 10-K annual report. Finally, just last week, The Wall Street Journal reported that the Justice Department may have opened an investigation into the company following the brief report. All of this has caused Supermicro shares to fall nearly 30% since Hindenburg’s disclosure in late August.

However, today is Supermicro’s stock split and it’s a good time to take a closer look at the company. Here’s what you need to know:

Why companies do stock splits

First, a little background information on stock splits. As previously mentioned, these measures lower the per-share price of a stock to make it easier for more people to buy – and they do this by issuing additional shares to current holders. The move does not fundamentally change anything about a company, so the valuation and market value remain the same. Although the price per share falls, stock splits do not make shares cheaper.

This also means that a stock split alone is not a reason to buy a particular stock and does not act as a catalyst for a higher price. However, a stock split could be viewed as a positive move for a company because it could potentially attract more investors to the stock over time. And it suggests that the company’s management is optimistic about the future and believes the stock has what it takes to climb higher from its new lower price.

Now let’s move on to Supermicro operations. Supermicro is implementing a 10-for-1 stock split, meaning holders of one share will receive nine additional shares after today’s market close.

The total value of the holding will not change, but each share will be worth one-tenth of its original value. So if you use the current level of Supermicro shares as a guide, the value of a share is likely to fall from around $400 to $40. And that means Supermicro stock will open tomorrow, October 1, at a new split-adjusted price of around $40.

If you are a shareholder of Supermicro, you don’t have to do anything. All of this happens automatically and the additional shares will appear in your brokerage account. If you’re not already a Supermicro shareholder, you might be wondering what happens if you buy the stock today, just before the split. You will also receive the additional shares, as the right to them is transferred from the seller. Finally, if you wait until tomorrow to buy the stock, you’ll get it at the split-adjusted price.

Should you buy Supermicro?

Is it better to buy now or wait until after the breakup? It’s true that the split makes it easier for you to buy Supermicro if you want to invest less than the current share price of $400. For example, with $100 you can easily purchase a few shares after the split. If this is your situation, you may want to wait until after the breakup to keep things simple.

But other than this particular scenario, it doesn’t actually matter whether you buy the stock before or after surgery – because as I mentioned above, this move only changes the price per share.

Now let’s answer one more question: Given the news mentioned above, should you really buy Supermicro stock? It’s true that Supermicro looks particularly cheap right now, trading at just 11 times forward earnings estimates. Very aggressive investors might consider picking up a few stocks at these levels.

It’s important to remember that Hindenburg Research has a short position in Supermicro, meaning the company benefits from a decline in the share price. Short selling involves investors borrowing shares of a company, selling them, and then buying them again – ideally at a lower price – to return them to the original owner. This means that Hindenburg has a bias, making it difficult to rely on the company as a source of information. Meanwhile, a Justice Department investigation has not been confirmed — and if an investigation is confirmed at some point, that doesn’t mean there was wrongdoing.

Earlier this month, Supermicro responded to concerns about the Hindenburg report and its own delayed annual report filing. The company called Hidenburg’s statements “false or inaccurate” and promised to address them “in due course.” Supermicro also said it does not expect the late filing of its annual report to lead to major changes in its earnings report. The company declined to comment on the Justice Department’s investigation report. The Wall Street Journal said.

So from the information we have today, Supermicro’s story still looks solid, and given the company’s market leadership and demand from AI customers, its long-term prospects remain bright.

However, uncertainty remains and even after the split, the stock could remain volatile. For most investors, it’s a good idea to wait until Supermicro fully considers the statements in the Hindenburg report or offers further clarification before buying. There’s reason to be optimistic about this company in the long term, but it’s best to gather all the facts before making any moves – buying or selling, for example.