Darktrace PLC (LSE:DARK) is facing intense scrutiny as the AI group prepares to release its latest trading update.
The group has found itself at the centre of a short-selling campaign by US hedge fund Quintessential Capital Markets (QCM), after the fund released a damning report accusing Darktrace of overstating sales, margins, and growth rates.
Evidence was laid out in a 70-page document titled Autonomy 2.0? The Dark side of Darktrace.
Darktrace has already lowered its revenue expectations for the full year to between 29.5% and 31% due to a larger impact on new customer growth, but has raised its expectations for adjusted EBITDA margin to 16.0 and 18.5% (previously 15 to 18%).
Comments from Sam Roberts, partner at Cooke, Young & Keidan, today commented on the allegations put forward by QCM.
"If we look to the recent past, there is ample evidence that scandals such as the one Darktrace finds itself mired in can, and often do, result in actual legal claims. Depending on what happens next, there is a real possibility that investors and shareholders could make claims against Darktrace to try to secure some form of financial recompense,” said Roberts.
DARK shares are up 2.4% to 237.70p today, thanks in part to a £75mln share buyback plan representing nearly 13% of its free float.