This is too sexy for me but I'll let you know about it. Darktrace is a firm in the UK with alot of clouds over it- the founder is awaiting a trial in the US from Autonomy software sale in 2018 or earlier and a short seller had been blasting the stock for a while.
Then on the 18th a UK audit report came out pretty much clearing the co.
The investment thesis has been cleaned up abit and I believe there is some short selling punishment being orchestrated just not by me.
July 18, 2023
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Darktrace logo
An
investigation of Darktrace’s finances has uncovered a “small number” of accounting errors but found no evidence to support allegations of widespread fraud, sending shares in the British cybersecurity company soaring.
A review by EY,
commissioned after claims from a US short seller earlier this year, “identified a small number of errors and inconsistencies”, Darktrace said on Tuesday.
However, it said the review did not require the company to revisit its previous financial statements.
Separately, it said that the Financial Reporting Council, the accounting watchdog, had inspected the regular audit of its accounts, carried out by Grant Thornton, and found “no key findings”
Shares in Darktrace rose by as much as 26pc as analysts said the review “clears the decks”. The company’s
share price had tumbled in January when New York based Quintessential Capital Management accused it of fraudulent accounting.
Darktrace’s founding shareholder is Mike Lynch, the British businessman who has been accused of a multibillion-dollar fraud over the 2011 sale of the former FTSE software company Autonomy to Hewlett Packard.
Mr Lynch is awaiting trial in the US on charges first filed in 2018.
“Neither management, nor the board consider EY’s report to have any impact on Darktrace’s previously filed public company financial statements nor to change their belief that those financial statements fairly represent Darktrace’s financial position and results,” the company said on Tuesday.
“In addition, Grant Thornton’s audit opinions for prior years remain unchanged and the audit for [2023] is in progress.”
It said EY had found a “small number of errors and inconsistencies” but that “systems, processes or controls could be improved” but that the company was already in the process of addressing this.
Darktrace’s chairman Gordon Hurst said: “We are pleased that EY has concluded its review and with the cooperation and transparency EY received from Darktrace employees at all levels. This has further reinforced the board’s confidence that management has set a tone and culture consistent with good governance.”
The company has passed EY’s 88-page review to the Financial Conduct Authority and FRC.
Darktrace was founded by Mike Lynch, who is awaiting trial in the US over allegations of fraud - Simon Dawson/Bloomberg
It came as Darktrace,
which specialises in artificial intelligence systems that root out cyber attacks on companies’ computer networks, upgraded profit forecasts.
It said it expected to report profit margins of 22pc, up from previous estimates of 19pc, when it reports annual results in September. It said it expected trading in the first half of the next financial year to be affected by tough economic conditions, but pick up after that.
Darktrace was one of a handful of high-profile technology flotations in 2021 and is one of the few whose share price has improved since the company went public.
Gabriel Grego, the founder of Quintessential Capital Management, said after the announcement that the short seller continued to have questions about Darktrace’s accounting.
Mr Grego said Darktrace had not unveiled the details of the EY review and that the company’s claims that the review did not affect its accounts “appear to be the sole judgments of Darktrace and its board, rather than recommendations from EY”.
