Darktrace launches £75m buyback scheme after short-seller allegations hit share price
Darktrace has launched a £75m share buyback scheme in a bid to bolster investor confidence after a short-selling US-based fund questioned the Cambridge cybersecurity company’s financial statements – questions which resulted in its share price falling to a record low of 198p.
Darktrace, which was founded in 2013, is a globally established provider of AI for enterprise, with the first at-scale deployment of AI in cybersecurity, and a pioneer of autonomous response technology. It floated successfully on the London Stock Exchange in 2021 and today serves 8,100 customers in 110 countries, with more than 2,200 employees globally.
The 70-page report published on Tuesday (January 31) by New York-based Quintessential Capital Management (QCM) said: “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.”
Darktrace’s shares promptly fell 10 per cent to an all-time low of 198p: in mid-2022 the share price had reached 559.60p at its peak.
QCM’s allegations that Darktrace employed questionable sales and accounting practices to drive up the value of the company before its multibillion pound flotation on the London Stock Exchange in 2021 included unwelcome criticism of the links between the management of Darktrace and Autonomy, both of which were founded in Cambridge by Mike Lynch, the controversial billionaire currently facing extradition charges – all of which he denies – relating to accounting irregularities in the $11bn sale of Autonomy to Hewlett-Packard in 2011.
Commenting on the reports, Poppy Gustafsson, CEO of Darktrace, said: “We embrace the scrutiny of the public markets. However, it is also important to refute any unfounded inferences about the listed business we are today and push back in the strongest terms on any suggestions that this is a business that is not being run with the greatest integrity. The purpose of our statement today is to explain what we've done to establish and enforce robust processes in our business. I stand by my team and the business I represent.
“We are a business that is growing fast and generating cash. Our technology is world-class, created here in the UK by some of the brightest minds, and we are solving one of society’s most pressing challenges – the terrible costs of cyber disruption. We will continue to address any legitimate questions that may arise.”
Darktrace shares rose 5 per cent to 221p following the company’s £75m buy-back of 35m shares on Wednesday (February 1).