Darktrace Plc Launches Independent Third-Party Review of Financial Processes and Controls
By Darktrace Plc, the British cybersecurity company that’s been the target of short-seller reports, has announced that it has appointed Ernst & Young LLP to provide an additional independent third-party review of its key financial processes and controls.[0] Paul Harrison, the Chair of the Darktrace Audit & Risk Committee, will receive a report from E&Y.[1]
Chairman 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.”[2]
The review comes after Quintessential Capital Management (QCM) produced a 70-page report about Darktrace’s finances and bet against the company, taking a short position on its shares. QCM accused Darktrace of questionable and aggressive marketing, sales and accounting practices in order to drive up the value of its shares.
Darktrace has denied QCM’s accusations and is commissioning the audit to put down doubts about its accounting.[3] Chief Executive Officer Poppy Gustafsson said it was “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.”[4]
Darktrace shares rose more than 2% on Monday on the heels of the announcement.[5] The company said it does not expect to be in a position to provide an update on the review at the time of its first-half earnings report on Mar. 8 and did not provide a timeline or when it would release the findings.[1]
QCM said it welcomed Darktrace’s decision to initiate an independent review of its finances, and expressed its hope that the review will be of sufficient granularity, skepticism and impartiality to provide insights into the dubious transactions that QCM flagged in its report.[3]
0. “Darktrace hires EY to review finances after short-seller attack” The Guardian, 20 Feb. 2023, https://www.theguardian.com/business/2023/feb/20/darktrace-hires-ey-short-seller-cybersecurity-quintessential
1. “Darktrace appoints Ernst & Young to conduct independent third-party review” DirectorsTalk Interviews, 20 Feb. 2023, https://www.directorstalkinterviews.com/darktrace-appoints-ernst-young-to-conduct-independent-third-party-review/4121106875
2. “Darktrace calls in EY after short-seller claims” The Times, 20 Feb. 2023, https://www.thetimes.co.uk/article/darktrace-calls-in-ey-after-short-seller-claims-n59ndk2hv
3. “Darktrace Hires Ernst & Young for Review After Short Seller Report” Yahoo Finance Australia, 20 Feb. 2023, https://au.finance.yahoo.com/news/darktrace-hires-ernst-young-review-075246264.html
4. “Darktrace calls in EY auditors to debunk ‘channel stuffing’ claims” IT PRO, 20 Feb. 2023, https://www.itpro.co.uk/business/370098/darktrace-calls-in-ey-auditors-to-debunk-channel-stuffing-claims
5. “Darktrace turns to E&Y for probe of financial processes” Marketscreener.com, 20 Feb. 2023, https://www.marketscreener.com/quote/stock/DARKTRACE-PLC-122281559/news/Darktrace-turns-to-E-Y-for-probe-of-financial-processes-43032943/
