Temenos, a pioneer in banking software, faces scrutiny amidst financial innovations and accusations.

Shares in the Geneva-based banking software manufacturer Temenos plummeted on Thursday. The background to this is a report by short-seller Hindenburg Research, which mentions serious irregularities in Temenos’ accounting. The Board of Directors has meanwhile strongly rejected the allegations.

In the report, which was published in the middle of trading on Thursday afternoon, Hindenburg Research spoke of serious irregularities in Temenos’ accounting – such as signs of manipulated profits. The irregularities include “evidence of roundtrip revenue, sham partnerships, excessive frontloading of contract renewals, backdated contracts, overcapitalization of seemingly non-existent R&D investments, and other classic accounting red flags.”

According to Hindenburg, this was based on conversations with 25 former Temenos employees. These accounting practices were probably an open secret among many former employees, the short-seller continued. Several of the interviewees had stated that interim CEO Andreas Andreades had encouraged these practices and helped to conceal customer dissatisfaction with the products and staff turnover.

At the end of the multi-page report, however, Hindenburg Research also referred to the fact that it is “short” in Temenos shares, i.e. it is betting on falling prices.

Accusations sharply rejected

Temenos emphatically rejected the allegations after hours of waiting late on Thursday afternoon shortly before the close of trading. The Hindenburg report contains factual inaccuracies and analytical errors as well as false and misleading statements, the Geneva-based company’s Board of Directors said in a statement. The shares had been suspended from trading shortly beforehand.

In the statement, the Board of Directors expressed confidence in the strength of Temenos’ business, financial performance and liquidity position. Temenos will present its financial figures for 2023 next Monday after the close of trading as planned. The audited results will be in line with the preliminary figures announced on January 19, 2024, it said.

Annual recurring sales would exceed the forecasts. Total software licenses and operating profit EBIT were also well above the minimum forecasts. Free cash flow increased by 26 percent to 242.6 million dollars. Group management also expects free cash flow to continue to grow strongly in the coming years.

Trading resumed at 5.15 pm. However, the share remained in the hole and ended the trading day down 28.2 percent at 63.54 francs. At the day’s low of CHF 58.50, the share price even fell below the CHF 60 mark, its lowest level since March 2023.

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