Temenos AG plunged by nearly a third, slashing its market value by $2.1 billion, after Hindenburg Research took a short position and suggested serious flaws in the books of the Swiss provider of software for banks.

The Swiss company denied the report, saying it contained “factual inaccuracies and analytical errors, together with false and misleading allegations.” In its exposé, the activist short-seller founded by Nate Anderson referred to “major accounting irregularities” and said Temenos “manipulated earnings,” practices it claims were an “open secret” within the company.

“We take these allegations seriously,” Julius Baer Group Ltd analyst Cengiz Sen said. The broker put its recommendation for Temenos shares and price target under review.

Hindenburg rose to prominence last year when it targeted the empires of high-profile businessmen like Gautam Adani, Jack Dorsey and Carl Icahn, wiping out billions from their firms’ market capitalization at one point. Short-seller activists carry out investigations into companies and seek to make money when their reports depress the stock price.

Track Record

“Their track record speaks for itself, and investors have learnt to listen when they make a call,” said Chris Beauchamp, chief market analyst at online trading platform IG. “They take their time over the research they produce. Hence when they speak, the market pays heed.”

Temenos traded as much as 34% lower, before closing at 63.5 francs, down 28% — the biggest drop since 2009 on a closing basis. The company’s now worth about a third compared with its 2019 peak of 13 billion Swiss francs ($14.7 billion).

Bloomberg Intelligence analyst Tamlin Bason said the report may erode the “positive sentiment” provided by Temenos’s 2023 results following a “disastrous 2022.” The company may address the report during its capital markets day on Feb. 20, he said.

Even before the report, analysts were divided on the Swiss company, which had five buy-equivalent ratings, 10 holds and four sells, according to data compiled by Bloomberg. Its shares gained 12% this year through Wednesday’s close after a 54% rally in 2023. A year earlier, the stock slumped 60%.

The short seller’s bet against Temenos follows a series of major targets by Hindenburg, including India’s Adani group of companies and electric vehicle company Nikola Corp. The share performances of these firms have mostly been negative, with Adani’s main company underperforming the local benchmark over a 12-month period, while the likes of Lordstown Motors Corp., Nikola and DraftKings Inc. have also suffered big blows. Other targets including Block Inc. And Ebix Inc. recovered from the initial setback after Hindenburg’s report.

Read More: Hindenburg’s Icahn, Adani Calls Mark Year of Prominent Bets

Ivan Cosovic, the Dusseldorf-based founder of data tracking firm Breakout Point, said the plunge in Temenos shares highlights the “significant impact” that activist short-sellers can have on the market.

“Their long track record of identifying overvaluations and misconduct has given their analysis substantial weight, and impacts markets dramatically and instantly,” he said.

Read More: What’s Short Selling? What Is Hindenburg Research?: QuickTake

A spokesperson for Switzerland’s Financial Supervisor Finma declined to comment on Temenos, saying that it doesn’t comment on individual cases. Bloomberg News has also reached out to Hindenburg for comment.

Buyout Target

Temenos has long been of interest to buyout firms including EQT AB, Permira, Nordic Capital, Thoma Bravo and KKR & Co. Takeover talks fell apart in 2022 due to tech valuations and pricing concerns.

The Geneva-based company is also in the midst of a lengthy search for a chief executive officer. The company’s chairman Andreas Andreades is currently the interim CEO after Max Chuard stepped down in January 2023 following activist pressure.

Temenos creates cloud-based software that financial institutions can use to offer digital banking solutions, foreign exchange and identity verification services. It’s used by more than 3,000 clients including Standard Chartered, Julius Baer, and Nordea, according to its website.

By Allegra Catelli and Lisa Pham (Bloomberg)