Darktrace hires EY to review finances after short-seller attack
Darktrace has hired EY to conduct an independent review of its finances as it tries to defend itself against a hedge fund that alleges questionable marketing, sales and accounting practices at the cybersecurity company.
The FTSE 250 company said the accountancy firm EY would provide “additional independent third-party review of its key financial processes and controls”, in a statement to the stock market on Monday.
A New York-based hedge fund, Quintessential Capital Management (QCM), has bet against Darktrace, taking a short position on shares. It accused Darktrace last month of a series of questionable and aggressive marketing, sales and accounting practices in a 69-page report. “After a careful analysis, we are deeply sceptical about the validity of Darktrace’s financial statements and fear that sales, margins and growth rates may be overstated and close to a sharp correction,” QCM alleged.
Darktrace strenuously denied the allegations. Poppy Gustafsson, its chief executive and co-founder, published a lengthy response saying that the company was run with “the greatest integrity” and that it had “world class” technology.
Gordon Hurst, the chair of the Darktrace board, said on Monday: “The board believes fully in the robustness of Darktrace’s financial processes and controls. As a sign of that confidence, we have commissioned this independent third-party review by EY. We look forward to the outcome of this review.”
Darktrace said it would report EY’s findings but these would not be ready in time for half-year results on 8 March. Grant Thornton is the company’s auditor.
The company had been struggling before Quintessential’s report. Analysts and other hedge funds had raised concerns about Darktrace’s business model and its
Read more on theguardian.com
