A short seller nicknamed the ‘Dark Destroyer’ has set his sights on Darktrace PLC (LSE:DARK), the cybersecurity company, having amassed a £13 million stake.
Matthew Earl is the managing partner of ShadowFall, a hedge fund focused on shorting companies, and was one of the early critics of German payments company Wirecard (ETR:WDI).
He publicly labelled the company a fraud and four years after making these claims, Wirecard (ETR:WDI) went bust and its boss was put on trial for fraud.
Now, it is revealed Earl has developed a 0.52% net short position in Darktrace – short sellers are required by law to disclose their position once it reaches above 0.5% of total issued shares.
ShadowFall has been short-selling Darktrace since January and while it hasn’t confirmed the rationale behind the most recent position, Earl has been critical of the FTSE 250 company in the past.
Last year, he told reporters that the hedge fund’s concerns about the company focused on its churn rate, leadership team and culture.
In February, Darktrace faced an attack from another short seller called Quintessential Capital Management.
Quintessential argued Darktrace’s accounting was not up to scratch, a claim which subsequently led to accountant EY launching an investigation into its financial reports.
No issues were found in the investigation and Matthew Moulding, boss of fellow FTSE company THG, was quick to call out the short sellers, alleging that some organisations create negative sentiment around stocks to improve their returns.
Darktrace has an overall net short position of 1.13% - the same as Entain – according to ADVFN, but if shorters are an indication of trouble at a company, there are other groups investors should be worrying about.
Asos has 7.6% of its shares shorted, while Metro Bank is at 6.4% and Boohoo comes in at 6.1%.
Darktrace is up 2% on Monday, having opened at around 347p.