Temenos Announces Independent Review of Hindenburg Claims

Allegra Catelli and Paula Doenecke, Bloomberg News

A Temenos AG logo on a smartphone arranged in Budapest, Hungary, on Friday, Feb. 16, 2024. Temenos was a target of activist investors even before a report by Hindenburg Research led to the biggest drop in 15 years in the Swiss banking software company’s shares. Photographer: Akos Stiller/Bloomberg , Bloomberg

(Bloomberg) -- Temenos AG announced an independent examination of the claims of financial irregularities raised by Hindenburg Research in a report last week about the Swiss banking-software maker.

The board “will oversee a thorough examination of the allegations raised with independent third parties,” Chairman Thibault de Tersant said Monday in a statement on the publication of full-year results. “I want to assure you of my confidence that Temenos is running a sound business with good financial controls in place.”

In an analyst call, he estimated that the review will take “significantly” less than five months, saying: “We have a responsibility to be speedy, but also thorough.”

Hindenburg on Thursday alleged “major accounting irregularities” and that Temenos “manipulated earnings,” adding that the practices were an “open secret” within the firm. The report sent shares tumbling by about a third last week, before they rebounded by as much as 10% on Monday.

More details will be disclosed at the company’s capital-markets day on Tuesday, with expectations high in the wake of the rout.

This “indicates that the board intends to fully clarify the situation,” said Michael Foeth, an analyst at Vontobel. HSBC’s Antonin Baudry said Temenos needs “some straightforward disclosure to mitigate some or all of the concerns.”

Aside from the controversy, the company is continuing its search for a replacement for interim Chief Executive Officer Andreas Andreades.

Temenos got close to naming a new CEO in the second half of 2023 but that appointment “unfortunately did not proceed,” de Tersant said. “We are making good progress toward hiring an alternative and managing the transition,” he said.

The process has already been long. Andreades assumed his current role in 2023 after his predecessor, Max Chuard, was pushed out following pressure from activist investor Petrus Advisers.

On Monday, the company also reported revenues that were in line with expectations and announced a dividend per share of 1.20 Swiss francs ($1.3606) — topping analyst estimates for 1.08 Swiss francs.

Andreades said he’s “confident we will deliver on 2024 guidance.”

Created three decades ago, Temenos says on its website that its platform enables 1.2 billion people to carry out their daily banking needs — equivalent to 30% of the world’s banking population. Clients include Standard Chartered, Julius Baer, and Nordea, according to the website.

The company has long been a target for buy-out firms including EQT AB, Permira, Thoma Bravo and KKR & Co. Takeover talks fell apart in 2022 due to pricing divergences among management and shareholders. The latest was Nordic Capital.

(Updates with more context, quotes from call starting in third paragraph.)