The Swiss stock market was rocked by drama yesterday when Temenos, a firm that provides technology services for banks, wealth managers and other financial organisations, was targeted by a short-seller, which accused Temenos of wrongdoing in its accounts and conduct. Temenos refutes the claims.

Zurich-listed Temenos yesterday slammed a report from an activist short-seller claiming that it has “manipulated earnings.”

Shares in the firm were down as much as 30 per cent from the open yesterday after Hindenburg Research, a US-based firm, issued its report. The business has taken out a short position in Temenos, it said. Today, shares were down about 7 per cent, fetching SFr59.10 ($67.1) per share.

Temenos said it “fundamentally refutes” the Hindenburg Research comments. 

“The report contains factual inaccuracies and analytical errors, together with false and misleading allegations, which are intended to adversely impact the company’s share price. The company was not contacted in advance for any comment on the report,” Temenos, which provides services for private banks, wealth managers and other financial institutions, said in a statement. 

“The company is confident in the strength of its business, financial performance and cash position,” it said. 

Temenos said that after markets have closed on 19 February, it will issue its audited results for the year ended 31 December 2023. These results are “in line with the pre-results announcement made on 19 January 2024,” Temenos said. 

The 19 January report contained the following details: 

-- Annual recurring revenue exceeding guidance and total software licensing and earnings before interest and tax “significantly exceeding minimum guidance”;
-- Strong free cash flow growth ahead of guidance in the 2023 financial year, rising 26 per cent to $242.6 million – the board expects free cash flow to continue to grow strongly in the coming years; 
-- About 3,000 customers – industry-leading churn of only about 3 per year on a dollar basis; and 
-- The company’s transition to a recurring revenue business model continues at pace – 391 go-lives on its software in 2023.

This news service has contacted Temenos for comment but had not received a reply at the point of going to press. This report may be updated in due course.

Stock turmoil
Trading in the company’s stock was halted in Zurich after the release of the Hindenburg Research report, Bloomberg reported yesterday.

Hindenburg Research, run by Nate Anderson, achieved notoriety in 2023 by targeting the businesses of figures such as Gautam Adani, Jack Dorsey and Carl Icahn. 

In its statement – a copy of which was emailed to this news service – Hindenburg Research said: “Our 4-month investigation into Temenos, involving interviews with 25 former employees, including senior leaders at the company, uncovered hallmarks of manipulated earnings and major accounting irregularities. This includes evidence of roundtripped 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.

“These aggressive accounting practices seemed to be an open secret among many of the former employees we spoke with. Several indicated that CEO Andreas Andreades encourages the practices, which help gloss over significant customer product dissatisfaction and attrition," it said.