Temenos shares slide a second day as short seller's allegations wipe $2 billion off market cap

By Louis Goss

Temenos shares continued to crash on Friday, despite the Swiss technology firm's attempt to hit back at allegations made by short seller Hindenburg Research that have knocked more than $2 billion off its market capitalization.

Hindenburg's report, which was published on Thursday, accused Temenos of using "aggressive accounting tactics" to boost the share price and gloss over deeper problems inside the company which were driving away its customers.

In a post on its website, Temenos said Hindenburg's report contains "factual inaccuracies" and "false and misleading allegations," as the Swiss banking technology company said it "fundamentally refutes" the short seller's claims.

Temenos (CH:TEMN) shares fell 8% on Friday, following a 24.9% drop on Thursday. Shares in the Switzerland listed company surged 54% in 2023.

The New York investment fund alleges Temenos CEO Andreas Andreades encouraged the use of manipulative accounting methods inside the company, while failing to recognize deficiencies in its products that had led to widespread dissatisfaction among customers.

The short sellers report notes that Temenos' executives have sold $1.1 billion worth of stock in the company over the previous 10 years, while purchasing just $26 million worth of shares in the Swiss technology company over the same period of time.

In a post on its website, Temenos said it plans to publish audited results for the full-year 2023 on Feb. 19, and that it is "confident in the strength of its business, financial performance and cash position." Some are hoping for more comment from the company's Capital Markets Day planned for Feb. 20.

Temenos did not offer any specific information on which allegations it refutes, and said it was not contacted by Hindenburg prior to the publication of its report.

However, in its report, Hindenburg said Temenos told the short seller it would "fully investigate" and claimed to have taken "every step to be as open and forthcoming as possible with data."

Temenos was approached by MarketWatch for further comment.

A team of analysts at Jefferies, led by Charles Brennan, raised questions about one of Hindenburg's points surrounding Temenos' investments in research and development (R&D).

Hindenburg's report claimed Temenos listed client specific implementation costs as investments in R&D, leading to the company having a 62% higher R&D capitalization rate than its peers. The short seller said this practice led to a 29.5% artificial boost to 2022 pre-tax profits.

Jeffries analysts, however, said that while Temenos has previously capitalized more of its costs than peers, this practice was debated openly by investors and led to the company enjoying only an incremental benefit between 2018 and 2020. The analysts said Temenos' "current level of net capitalization appears in line with peers."

Hindenburg Research derives its name from the 1937 Hindenburg Disaster, which it describes as "the epitome of a totally man-made, totally avoidable disaster."

The short-seller says it uses "hard-to-find information from atypical sources" to shed light on "man made disasters floating around in the market."

Hindenburg's four month long investigation into Temenos was based on sources including interviews with the Swiss firm's customers and former company executives.

The New York fund, which was founded by Nathan Anderson in 2017, attracted significant attention in 2020 after publishing a report that raised allegations of fraud inside electric vehicle maker Nikola Corporation (NKLA) that saw shares in the company drop 40%.

Hindenburg Research was approached by MarketWatch for comment.

-Louis Goss

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02-16-24 0729ET

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