Yahoo Finance Darktrace Hires Ernst & Young for Review After Short Seller Report
(Bloomberg) -- Darktrace Plc, the British cybersecurity company that’s been the target of short-seller reports, said it’s hired accounting firm EY to review “key financial processes.”
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The company said in a statement on Monday that it stands behind its results and is commissioning the audit to put down doubts about its accounting that short seller Quintessential Capital Management raised last month. Darktrace refutes QCM’s accusations.
Darktrace shares hit a record low after the report. It called into question the company’s accounting and drew comparisons with Autonomy, a software company created by Darktrace’s founding investor, Mike Lynch. Lynch has been mired in fraud accusations for the last decade in relation to his 2011 sale of Autonomy to Hewlett Packard Enterprise Co. Lynch denies the allegations.
Read More: Darktrace Shares Reach Record Low After Short Seller Report
“The board believes fully in the robustness of Darktrace’s financial processes and controls,” Chairman Gordon Hurst said in the statement. “As a sign of that confidence, we have commissioned this independent third-party review.”
The shares rose 2.7% to 270 pence at 8:31 a.m. in London trading. The stock has declined about 19% in the last 12 months.
Darktrace Chief Executive Officer Poppy Gustafsson, who’s also a former Autonomy employee, said in February that it’s “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.”
“We welcome Darktrace’s decision to initiate an independent review of its finances,” QCM said in a tweet. “We hope that such review will be of sufficient granularity, skepticism and impartiality to provide insights about the dubious transactions we flagged in our report.”
Darktrace doesn’t expect the report to be ready in time for its half-year results on March 8. The company reiterated its guidance from its January report.
(Updates with QCM comments in seventh paragraph)
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