Darktrace hires EY to review finances after short-seller attack

theguardian.com:

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