Shares in tech darling Darktrace plunged this morning after reports emerged of short seller ShadowFall betting against the stock.
The dip this morning follows a barrage of criticism from ShadowFall against the tech darling’s performance, accounting and culture, the Telegraph reported.
The hedge fund bet against Darktrace in October and labelled the cybersecurity giant as “watery thin” in a note to clients seen by the Telegraph.
ShadowFall said: “We believe that the quality of the Darktrace business is watery-thin, driven by an aggressive, promotional, sales focus, which we doubt will stand the test of time.”
The hedge fund, led by Matthew Earl, has not revealed the size of its position against Darktrace, but said the firm had overestimated the size of its potential market and growth trajectory which supporters predict could top a potential valuation of £30bn.
Shares in Darktrace slid as much as 7.3 per cent this morning to the bottom of the FTSE 250 before regaining some ground.
ShadowFall’s short position emerges just one week after Darktrace raised its full-year outlook for revenue and earnings margin following strong customer growth and retention in the first half of the year.
In its announcement last week, the firm said that it had a 39.6 per cent growth in its number of customers, with up to 6,531 customers, and at least a 45 per cent boost in annual recurring revenue (ARR) to at least $426m (£314m).
Shares surged as high as 20.8 per cent on the announcement last Tuesday.
A spokesperson for Darktrace told City A.M.: “For 1H FY 2022, Darktrace has reported a year-over-year revenue growth rate of (at least) 50%. It ended 1H FY 2022 with 6,531 customers [year over year growth of 39.6%]. At last reporting 86% of Darktrace’s customers used multiple of its products and, according to an independent survey by Berenberg, 65% of Darktrace users contacted expect to spend more with the company.”