Sonova Executives Resign After Insider Trading Investigation

Sonova Holding Outgoing CEO Valentin Chapero
Sonova Holding AG Chief Executive Officer Valentin Chapero resigned. Source: Sonova Holding AG via Bloomberg

Sonova Holding AG said its chairman, chief executive and finance chief are resigning their posts after a delayed profit warning prompted an investigation into possible insider trading at the Swiss hearing-aid maker.

Chief Executive Officer Valentin Chapero and Oliver Walker, Sonova’s chief financial officer, have handed in their resignations, the Staefa, Switzerland-based company said in a statement today. Chairman Andy Rihs will also step down from his post while remaining on the board, Sonova said. The board appointed Robert Spoerry as its new chairman. Alexander Zschokke will be interim CEO.

The resignations came after an external investigation into share sales by directors and executives before Sonova reduced its profit forecast on March 16. Sonova cited the recall of an implant, a delay in introducing new products and currency swings as the cause of the warning. The stock fell as much as 9.4 percent in Zurich trading. The company has lost almost 30 percent of its value in the past month.

The investigation “showed weaknesses in internal processes,” Sonova said in the statement. “It came to the conclusion that internal rules were not enforced” and the profit warning was published too late, the company said.

‘Sanctions and Fines’

A Sonova board member sold 300,000 shares on March 8 at 125.07 francs each, for a total of 37.5 million francs ($41 million), according to transaction notices on the SIX Swiss Exchange website. An executive member of the board sold 800 shares at 127 francs each on March 4, for 101,600 francs, according to the website.

Company directors and managers sold about 2.4 million shares and warrants between Feb. 1 and March 16, when the new forecast was issued, the exchange said.

The outcome of the outside probe could be, in the worst case, “sanctions and fines,” Ingeborg Oie and colleagues at Jefferies International in London wrote in a note to clients.

Sonova scaled back its sales growth forecast on March 16, saying revenue in the year ending March 31 would rise about 7 percent, down from an earlier estimate of between 8 and 10 percent. It blamed the November recall of its Advanced Bionics hearing aid and regulatory difficulties that slowed the introduction of the Phonak hearing aids in the U.S.

The company’s strategy remains “absolutely intact,” Zschokke said at a press conference today.

Oie and colleagues, who rate the stock a “hold,” said Sonova’s troubles creates an opportunity for rivals to gain market share.

Jefferies had forecast that Sonova would outgrow the overall hearing-aid market in the coming year “based on our expectation of strong execution from an experienced management team,” Oie wrote. “The transition creates more uncertainty around these assumptions.”

Sonova dropped 6.35 francs, or 6.8 percent, to 86.95 francs at 10:17 a.m. in Zurich.

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