- Cybersecurity firm Darktrace announced Monday that it has hired accounting firm EY to review its “key financial processes and controls.”
- It comes after short seller Quintessential Capital Management said in a report it was “deeply skeptical about the validity of Darktrace’s financial statements” and believed sales and growth rates may have been overstated.
- Darktrace Chief Executive Officer Gordon Hurst said the decision to initiate a review was a sign of his confidence in the robustness of Darktrace’s financial processes.
Darktrace, one of the UK’s largest cybersecurity companies, was founded in 2013 by a group of former intelligence experts and mathematicians.
Omar Marks | SOPA images | LightRocket via Getty Images
LONDON — Cybersecurity firm Darktrace announced on Monday that it has hired accounting firm EY to review its “key financial processes and controls” to allay investor fears after a short seller accused the company of manipulating its accounts .
“The Board of Directors fully believes in the robustness of Darktrace’s financial processes and controls. As a sign of that confidence, we have commissioned this independent audit by E&Y,” Chief Executive Officer Geoffrey Hurst said in a statement. “We look forward to the outcome of this review.”
EY will report to Darktrace’s Audit and Risk Committee Chair, Paul Harrison, Darktrace said. Darktrace said it does not expect to be able to update the markets until the mid-year earnings report on March 8 and did not provide a timeline or date when the results would be released.
Darktrace shares rose more than 2% Monday after the announcement. Shares are up 4% year-to-date despite a sharp plunge in late January.
Darktrace, whose tools enable companies to use artificial intelligence to combat cyber threats, was targeted in a report last month by New York-based asset manager Quintessential Capital Management examining Darktrace’s business model and sales practices.
QCM said it found alleged flaws in Darktrace’s accounting, including “round-tripping” and “channel stuffing” practices designed to inflate revenue. The company said it was “deeply skeptical about the validity of Darktrace’s financial statements” and believes its revenue and growth rates have been overstated.
Darktrace dismissed the claims, with its CEO Poppy Gustafsson defending the company from what she called QCM’s “baseless conclusions”, saying it has “robust processes in our business”. She added, “I stand by my team and the company I represent.”
VIDEO: Three decades after the internet was invented, Tim Berners-Lee has some ideas on how to fix it