Darktrace hires EY in bid to win back credibility after short seller questions accounts
Cybersecurity company Darktrace has hired EY to review its finances in a bid to win back credibility after a short seller questioned its accounts.
Darktrace has recruited the Big Four auditor to carry out an independent review after New York investment fund Quintessential Capital Management cast doubt over the “validity” of the tech firm’s financial results.
Darktrace chairman Gordon Hurst said: “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 E&Y. We look forward to the outcome of this review.”
In a 70-page report, published last month, Quintessential said it was “deeply sceptical about the validity of Darktrace’s financial statements”.
The New York short seller raised concerns that Darktrace’s “sales, margins, and growth rates may be overstated” and warned the tech firm’s accounts contain “serious accounting red flags”.
The investment fund alleged Darktrace may have used “phantom” customers to bolster its sales as it raised concerns about the tech firm’s links to shadowy offshore companies.
Darktrace later responded to Quintessential’s allegations, with company chief executive Poppy Gustafsson saying the firm is run with the “greatest integrity”.
Quintessential in turn hit back at Darktrace’s “lame ‘non response’ to our 70 page report”, calling on the Cambridge firm’s executives to “admit their responsibility and resign at once”.
The short seller argued Darktrace’s management failed to actually deny any of its allegations and said that it failed to address any of its concerns.
Darktrace chief Gustafsson subsequently upped her stake in the cybersecurity company, buying more than £100,000 worth of shares.
Shares in Darktrace were up around 1.8 per cent at the time of reporting.