Super Micro Computer's (NASDAQ: SMCI) share price closed out the daily session down 8.3%. Meanwhile, the S&P 500 (SNPINDEX: ^GSPC) ended the day up 0.4%, and the Nasdaq Composite (NASDAQINDEX: ^IXIC) ended the session up 1.2%.
Supermicro stock lost ground today following news that the company may be looking to raise funds through stock sales or new debt. The company's share price likely also took a hit due to the stock being removed from the Nasdaq-100 index.
Supermicro stock slips on fundraising report
After the market closed on Friday, Bloomberg reported that Supermicro had hired Evercore to help it raise new sources of capital. The report stated that the server specialist was open to taking on new lines of credit and selling new stock in order to raise funds. Through Evercore, Supermicro is said to be approaching private equity firms to gauge potential investment interest. The prospective new fundraising push is said to be in the early stages.
If Supermicro does raise cash by selling more stock, this would have a diluting impact on existing shareholders. Selling new shares means that the company's capital structure would be broken into a larger number of pieces, and each piece would account for a smaller piece of the overall pie.
Supermicro couldn't avoid being removed from this Nasdaq index
Supermicro has been making moves to prepare its delayed 10-K report and prevent itself from being removed from the Nasdaq stock exchange. If the stock were to be delisted from the Nasdaq exchange, trading volume for the stock would drop dramatically -- and its share price would likely plummet. Adding another bearish pressure, the stock would be removed from exchange-traded funds (ETFs) that track the Nasdaq and other indexes.
Supermicro has been able to avoid this pitfall thus far, and it says that it should have its 10-K report submitted to the Securities and Exchange Commission (SEC) by Feb. 25. But it hasn't been able to prevent its stock from being removed from a separate index.
The Nasdaq-100 is an index that consists of the 100 largest nonfinancial companies that trade on the Nasdaq stock exchange. Due to recent volatility, Supermicro was removed from the index and replaced by Palantir Technologies today. As a result of being removed, Supermicro stock is also being dropped from ETFs that track the index. That means that shares are being sold out of those funds, which creates a bearish valuation pressure for the stock.
While removal from the Nasdaq-100 doesn't mean that Supermicro will continue to fall over the long term, the stock's replacement highlights recent challenges for the company that have yet to be resolved.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
