Matt Moulding, the founder and chief executive officer of THG PLC (LSE:THG), has found himself embroiled in a heated debate with Quintessential Capital Management (QCM) over the short seller’s attack on Darktrace PLC (LSE:DARK) earlier this year.
In February, QCM released a 70-page document claiming tech firm Darktrace overstates sales, margins and growth rates. The report was met with shock and at the time led to Darktrace’s share price sinking by more than 15%.
Quickly, Darktrace, which denied the allegations, appointed accountant E&Y to oversee a review of its financials and around six months later its report revealed the claims made by QCM had no basis.
Hearing of this was enough for Moulding to head to Linkedin, where he posted a scathing review of the short-selling scene in the UK and called for financial regulators to be tougher on investment bankers and hedge funds.
Source Linkedin
Moulding said: “For pennies, you can make hundreds of millions by wreaking havoc against a company and its share price. Hence, rogue bankers and hedge funds show no limits, often with the help of some friendly media."
He said that even though millions were lost by UK investors, there has been little media coverage of the conclusion of the saga, which vindicates Darktrace as still a “UK tech darling”, and he therefore called on the Financial Conduct Authority (FCA) and even MPs to react.
Source Linkedin
QCM Responds
Gabriel Grego, the founder of QCM, responded to Moulding's post with four corrections to “misunderstandings” about the situation.
He said the E&Y report was only shared with Darktrace insiders, despite a request for it to be made public, and claimed that the report therefore lacks “the impartiality necessary for transparent evaluation”.
Pointing out that QCM’s claims weren’t refuted by Darktrace but instead “minimised” to reduce the impact, Grego said his work was aimed “at upholding market integrity”.
“It is essential to recognize the vital role that short selling plays in market efficiency and price discovery. The short thesis on THG's stock, validated by a significant drop in its value, might reflect underlying concerns that cannot simply be attributed to malicious intent,” he added.
Sour Grapes
“Reads to me like sour grapes,” Moulding replied, adding: “I doubt anyone believes Darktrace have anything left to answer, reflected in the huge share price bounce since your attack.
“Given the focus you have on transparency, maybe you could walk the talk, and provide details of your funders, so the public and markets can see who’s really behind these actions and who’s benefiting. After all, the public can see the real backers of LSE companies,” he said.
“Also, maybe share a full history of your short positions against Darktrace.”
Waffle
Grego then responded with further points:
Source Linkedin
“Lot of words but just waffle,” Moulding responded before pointing out he was interested in who had been funding QCM rather than who had founded it.
“Trying to argue you’re actions against LSE companies are a force for good is like a house burglar arguing he’s helping to de-clutter homes,” he concluded before offering Grego an interview with CityAM, which THG bought in July.