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Darktrace shares bludgeoned by short-seller report


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LONDON/MILAN — Darktrace shares plunged as much as 10% on Tuesday after a short-selling fund questioned the British cybersecurity company’s financial statements.

Darktrace said in a statement its management team and board had full confidence in its accounting practices and the integrity of its financial statements.

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It added the company had “rigorous controls in place across our business to ensure we comply fully with IFRS accounting standards.”

At 1620 GMT, Darktrace shares were down 4.3% at 210.6 pence. They earlier touched 198 pence, the lowest since their stock market debut in April 2021.

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“After a careful analysis, we are deeply skeptical 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,” New York-based Quintessential Capital Management (QCM) alleged in a 70-page report.

QCM told Reuters it had a short position of 1.3% in Darktrace shares. Its report cited official filings, site visits and interviews with peers in the industry.

Short-sellers borrow shares with the expectations of buying them back more cheaply, making a profit on the difference.

QCM’s report named Grant Thornton as Darktrace’s auditor. Grant Thornton was not immediately available for comment.

Marshall Wace, a UK hedge fund, also holds a short position in Darktrace, according to data firm Breakout Point.

A spokesperson for Marshall Wace said its position was “entirely separate from QCM’s and nothing to do with it.”

Darktrace shares have fallen 80% from a record high in September 2021, losing over 5 billion pounds ($6.1 billion) in market value in that time.

($1 = 0.8121 pounds)

(Reporting by Nell Mackenzie, Amanda Cooper and Danilo Masoni Editing by David Goodman and Mark Potter)


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