‘Snake oil’: doubts loom over tech firm Darktrace’s high-octane sales strategy

theguardian.com:

Darktrace is a well-oiled sales and marketing machine, as slick and turbocharged as the multimillion-pound McLaren Formula One sponsorship deal it uses to entice prospective clients, and yet the cybersecurity company continues to be overshadowed by questions about its technology and founding investor.

On the face of it, Darktrace is a great British tech success story. It was founded in Cambridge nine years ago by an alliance of mathematicians, former spies from GCHQ and artificial intelligence (AI) experts. Its market value hit almost £7bn within months of its stock market float last April as investors clamoured for a stake in the promise of a rare European superpower in the US-dominated cybersecurity space.

And yet Darktrace has been on a rollercoaster journey since then. The meteoric share price rise post-IPO that rapidly elevated Darktrace to the FTSE 100 lasted just three months until a wave of negative sentiment pushed down the company’s market value from its £10 peak, relegating it from the premium index of blue-chip companies listed in London.

Yesterday it became the biggest faller on London’s FTSE 250 market – crashing almost 15% or 62p to close at 362p – as the flight to safety triggered by the Ukraine crisis and jitters over the wider reassessment of mostly US-based tech stocks made investors turn a sceptical eye to its business.

Earlier this month, short-seller Shadowfall, which is understood to have a small short position in Darktrace, became the latest critic to weigh in after a Darktrace investor update that led to a momentary spike in its shares – a strategy one analyst has dubbed a deliberate “beat and raise” strategy to show consistent outperformance.

Matthew Earl, who heads the Shadowfall fund, has joined