In February, Darktrace was targeted by a short-selling effort led by New York's Quintessential Capital Management who claimed that the organization was possibly partaking in dubious activities to unjustifiably boost its sales. Darktrace confirmed that their audit conducted by EY revealed a "few mistakes and disparities" with some of the contracts, although nothing severe enough to make a difference to their financial statements. This news caused a 26% rise in Darktrace's stock in London's late afternoon trading.
Shares of Darktrace jumped 26% on Tuesday following news that auditing firm EY had completed a review of the British cybersecurity firm's financial processes and controls. This came after the firm was met with considerable resistance in February from asset management firm Quintessential Capital Management, who had raised questions regarding fraudulent practices used to boost sales. However, the EY investigation only discovered a "small number of errors and inconsistencies" with some contracts, which were deemed not to be of "material" significance. Darktrace expects annual recurring revenue of $626.5 million for the financial year ended June 30, and added 396 new customers during the quarter and 1,362 throughout the year. This growth is attributed to the surge in companies utilizing AI tools to detect and prevent cyberattacks. EY also reviewed Darktrace's channel processes, identifying the aforementioned errors and inconsistencies. Darktrace shared the findings of the review with the Financial Conduct Authority and the Financial Reporting Council. Quintessential Capital Management responded to the findings, calling on Darktrace to "unveil the details of the EY review and facilitate an open dialogue on its findings".
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