Darktrace (DARK) has brought in accountants Ernst & Young to conduct a third-party probe into its financial processes.
The Cambridge, England-based cybersecurity firm recently received scrutiny from short-seller Quintessential Capital Management, which criticised Darktrace’s management and said it is “sceptical” about its growth figures.
Quintessential said it found “numerous transactions” in the run-up to Darktrace’s initial public offering which involved simulated or anticipated sales to phantom end-users, meaning ones that do not actually exist.
“The board and management are confident that Darktrace’s independently audited public company financial statements fairly represent Darktrace’s financial position and results. The board and management stand firmly behind the statement made on 1 February 2023 and they believe it appropriate to demonstrate that by commissioning an independent review,” Darktrace said.
However, Darktrace’s statement on February 1 had not specifically answered any of the 20 questions asked by Quintessential in a response to a previous Darktrace release, in which Darktrace had said it had full confidence in its accounting practices.
The questions included whether Darktrace booked a sale to Italian car maker Maserati Spa in July 2020; the nature of the company’s relationship with Dominican Republic-based IT company Multicomputos SRL; and whether Darktrace sold anything to “suspected shell company” Alfatrade & Services Ltd, which officially is a supplier of clean energy products.
Darktrace is due to report interim results on March 8. The company said it does not expect to be in a position to update on the E&Y probe at the time and but will present the investigations findings “once it is complete”.
Chair 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.”
Darktrace shares were 2.36% higher at 269p each in London on Monday. The stock is down 19% over the past year, and is just above the 250p float price in 2021.
