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Shares in Temenos plunged almost a third this week, wiping nearly SFr3bn ($3.4bn) from its market value, as two prominent activist investors clashed over allegations of “major accounting irregularities” at the Swiss fintech.
Prominent US short seller Hindenburg Research accused Temenos of “manipulating” its earnings in a report published on Thursday, triggering the biggest share price drop in the Geneva-based company’s history.
Petrus Advisers — one of Temenos’ biggest shareholders — on Friday responded by accusing Hindenburg of sloppy research, while using the controversy to double down on its own call for a management change.
Tememos shares dropped 28 per cent on Thursday and closed down a further 4 per cent on Friday, valuing the company at just over SFr4.5bn.
At its peak valuation in 2019, the company, which provides software to financial services companies and claims 41 of the world’s top 50 banks as clients, had a market capitalisation of more than SFr13bn.
Temenos, which will hold an annual investor day on Tuesday, disputed Hindenburg’s allegations. “The [Hindenburg] report contains factual inaccuracies and analytical errors, together with false and misleading allegations, which are intended to adversely impact the company’s share price,” Temenos said on Friday.
Hindenburg said it had conducted a four-month investigation into Temenos and spoken with 25 former employees, including senior executives.
Its probe “uncovered hallmarks of manipulated earnings and major accounting irregularities”, Hindenburg said. “This includes evidence of round-tripped revenue, sham partnerships, rampant pulling forward of contract renewals, backdated contracts, excessive capitalisation of seemingly non-existent R&D investments, and other classic accounting red flags,” it added.
Hindenburg is betting against Temenos shares, meaning it has already profited from the plunge in the stock.
Less than 24 hours after Hindenburg’s report was published, Petrus questioned the sourcing of the allegations.
“Most of the points alleged by Hindenburg are based on hearsay talk from former disgruntled Temenos executives,” Petrus said in an open letter to Temenos chair Thibault de Tersant. “Since 2022, we have been speaking to many of them (many of whom clearly are on a revenge mission), plus numerous Temenos customers, partners and industry experts,” it added.
Petrus said its own activist campaign had reaped rewards and the company was addressing problems. But it added that chief executive Andreas Andreades was nevertheless still failing to do enough and blamed him for many of the company’s past problems.
Andreades has been serving as interim CEO since the departure of Max Chuard in January last year, who Petrus had also lobbied the board to remove. Petrus owns about 3 per cent of Temenos’ shares.
“We take these allegations [from Hindenburg] seriously,” said Cengiz Sen, an analyst at Swiss bank Julius Baer, which is also a client of the company.
