Shares of Ubiquiti Networks Inc. (UI 4.39%) were down 25.3% as of 1:20 p.m. EST Tuesday after it disclosed that the U.S. Securities and Exchange Commission has issued subpoenas to the company "relating to a range of topics."
More specifically, according to an SEC filing this morning, on Feb. 13, the agency requested documents and information on the wireless networking specialist's accounting practices, financial information, auditors, international trade practices, and relationships with distributors and other third parties. Ubiquiti also noted that it's still in the process of responding to the requests, and intends to fully cooperate with the SEC.
To be fair, subpoenas don't necessarily mean that Ubiquiti Networks has done anything wrong, and it's unclear exactly what led the SEC to take action at this point.
But it's also alarming considering that -- less than six months ago -- Ubiquiti Networks was the target of a scathing report from noted short-seller Citron Research that accused the company of fraud, and called into question the integrity of its distributors, corporate culture, high margins, and cash balances. Ubiquiti CEO Robert Pera vehemently denied the allegations, describing Citron as a stock manipulator, and tweeting: "I just put my head down and let the products and numbers speak for themselves."
It also doesn't help that Ubiquiti Networks stock is still reeling from a mixed quarterly report earlier this month. In it, the company detailed gross margin headwinds as strong demand for its core networking portfolio was overshadowed by $18.6 million in provisions from obsolete inventory, vendor deposits, and losses on purchase commitments stemming from weak sales of its new FrontRow wearable cameras.
In any case, investors will need to hurry up and wait to learn exactly what the SEC is after. But it's no surprise to see shares plunging in response to today's news.