Kyndryl: Stock Crashed, CFO Replaced

Kyndryl, the former IBM infrastructure specialist, lost more than half of its market value at the beginning of the week. According to reports, the background is a possible investigation by the US Securities and Exchange Commission (SEC) into Kyndryl's financial statements. While the company released figures for the third quarter of its current fiscal year on Monday, it also had to admit to delays in the mandatory filing of its quarterly report with the SEC. Furthermore, there was a veritable exodus of management: Chief Financial Officer David Wyshner and General Counsel Edward Sebold resigned with immediate effect. Vineet Khurana also stepped down from his position as Senior Vice President and Global Controller, taking on a different role within the company.

In a filing with the SEC, the company explained the delay by stating that an audit committee of its board of directors intended to scrutinize its cash management practices and the effectiveness of the company's internal controls. The company is responding to voluntary document requests from the SEC. “We are cooperating with the SEC,” Kyndryl CEO Martin Schroeter told industry publication CRN. “We do not expect any restatements or other impact on our financial statements. As these matters are not yet concluded, we cannot provide further comments at this time.”

“Material Weaknesses in Internal Control”

According to the SEC filing, Kyndryl expects to disclose material weaknesses in internal control over financial reporting. This applies to the most recent fiscal reports up to the calendar year 2024. Investors should also no longer rely on the statement from its auditor, PricewaterhouseCoopers, for the 2025 fiscal year. The management departures have since been provisionally filled.

For investors, these news were apparently reason enough to flee the Kyndryl stock. According to CRN, several law firms are already investigating whether Kyndryl has misled investors regarding its accounting practices and disclosures and could therefore be sued.

IBM spun off its infrastructure division under the name Kyndryl in 2021 and brought it to the stock market as a company. Around 90,000 employees in over 60 countries moved to Kyndryl. At the time, the infrastructure division was one of the group's highest-revenue areas, but IBM wanted to focus more on its cloud business. In Germany, according to the ranking by consulting firm Lünendonk, the company is among the top 5 IT service providers with a focus on operating services.

(axk)