Martin Ebner lost 250 million in one day: When the devil of Wall Street knocks on the door

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Nathan Anderson (39) has a bad reputation. He was once depicted with devil ears in a portrait in New York Magazine. The story broke two years ago when the financial speculator launched an attack against Indian billionaire Gautam Adani (61). The attack cost the friend of Indian Prime Minister Narendra Modi (73) more than $50 billion.

On Thursday, Anderson was firing on all cylinders again. This time, he had Temenos, the software company in Geneva, in his sights. Over lunch, he sent a report to investors and the media titled: “Temenos: serious accounting irregularities, failed products, and a misleading return.”

Bomb blowed. Shares of the software company fell on the Swiss stock exchange, losing almost 30 percent of their value by the end of trading. They also fell further on Friday, losing another 4.6 percent. This is a disaster for Temenos shareholders: book losses amount to over 2 billion francs. Martin Ebner is the largest investor with a share of almost 13 percent and lost 250 million francs. This amounts to about 7 percent of its assets, estimated at 3.3 billion.

“There’s something to say…”

When SonntagsBlick called Ebner’s investment company Patinex AG in Wilen near Wollerau SZ on Friday afternoon, Ralph Stadler answered the phone. He has been a part of the legendary investor’s inner circle for many years. “There’s something to say, but we don’t want to comment publicly on it,” Stadler says. The fact that Ebner, once a feared looter, allowed himself to be duped by a young hedge fund manager must have given him pause.

The attack on Temenos is unique in recent Swiss economic history. Anderson and his hedge fund, Hindenburg Research, belong to a small and controversial group of activist short sellers, also known as short sellers. They buy shares of struggling and sometimes questionable companies and speculate on falling prices.

Hindenburg Research wants to “keep track of man-made disasters circulating in the market,” as is the company’s belief. That’s why the company’s name includes the legendary airship. Anderson believes that the Zeppelin fire of 1937 was a man-made and therefore preventable disaster.

High risk short selling

To make money when prices fall, speculators must borrow shares for a certain period of time and then sell them “short.” If prices fall, the speculator buys back the securities at the lowest possible price and returns them to the owner. He pockets the difference as profit. This trick only works when prices drop. If prices rise, it can become very expensive because the speculator has to buy back the shares at a higher price. Short selling is considered high risk because the potential for loss is theoretically unlimited.

The short strategy is particularly effective when bad headlines further accelerate the price decline. This is the real core talent of Nathan Anderson and his hedge fund, who accompany their attacks with comprehensive and aggressively formulated analysis.

The hedge fund claims the research took four months. They spoke to 25 former employees of the company. The analysis revealed evidence of manipulated profits and serious accounting irregularities. We are talking about “sham partnerships, uncontrolled contract extensions, outdated contracts, over-capitalization of seemingly non-existent R&D investments, and other classic accounting warning signs.”

PWC’s sensitive role?

Temenos’ problem: Hindenburg’s attacks are generally taken seriously on the international stock market scene. According to Bloomberg analysis, in 25 of the 27 attacks, stocks crashed on the first day. In eleven cases prices returned to pre-attack levels twelve months later. In 14 cases prices continued to fall in the twelve months after the attack. The chances of Temenos shares recovering are less than 50 percent.

The software company was caught off guard by the attack. He “strongly denies” the allegations. The statements cast long-time driver Andreas Andreadis, 58, in a bad light. The Cypriot returned as operational boss last year after another activist investor shrilly called for the then CEO to be sacked and summed up the management as “vultures” who had been “shamelessly lining their own pockets for years”.

Unpleasant questions also arise for PWC, the auditing company that has audited Temenos’ books for 20 years – an unusually long period. A spokesman declined to comment when asked. PWC was also the auditor of Credit Suisse. He gave the big bank the green light just days before the collapse.

Source :Blick