Darktrace hires EY to review financial processes after short seller report

LONDON — Cybersecurity company Dark Trace announced on Monday that it had appointed audit firm EY to review its “key financial processes and controls”, in a bid 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 review by E&Y,” Board Chairman Geoffrey Hurst said in a statement. communicated. “We eagerly await the outcome of this review.”

EY will report to Darktrace Audit and Risk Committee Chairman Paul Harrison, Darktrace said. Darktrace said it did not expect to be able to notify markets of the review when it releases its first-half earnings report on March 8 and did not provide a timeline or date of publication of the results.

Shares of Darktrace rose more than 2% on Monday on the heels of the announcement. Stocks are up 4% year-to-date despite falling sharply in late January.

Darktrace, whose tools enable companies to combat cyber threats using artificial intelligence, was targeted last month in a report by New York-based asset manager Quintessential Capital Management, which investigated the business model and Darktrace sales practices.

QCM said it found alleged flaws in Darktrace’s accounting, including “round tripping” and “channel stuffing” practices that aim to inflate revenue. The company said it was “deeply skeptical of the validity of Darktrace’s financial statements” and believed sales and growth rates may have been overstated.

Darktrace pushed back against the claims, with its CEO Poppy Gustafsson defending the company against what she called “unsubstantiated inferences” made by QCM and saying it had “robust processes in our business”. She added: “I support my team and the company I represent.”

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