Times Article8 Sep 2022 16:53
https://www.thetimes.co.uk/article/dark-day-for-darktrace-as-shares-slump-after-suitor-backs-out-xlgkr80dm
Gutted no mention of £6bn
Shares in Darktrace slumped by almost a third today after the US private equity fund Thoma Bravo said it was not going to proceed with a potential takeover bid.
Darktrace also announced that it was restating its accounts having discovered that $3.8 million of revenue that was entered in the first half of 2022 should have been accounted for in 2021. The change has not affected total revenues or their forecasts, it said.
The twin announcements nevertheless led to the Cambridge-based cybersecurity firm’s share price slumping by 30 per cent, or 165.5p, to 358p in early trading. It led one London technology analyst to say that the business, which floated in London in April last year, seems to be “haunted by a Chinese curse”.
Today’s drop in the share price has taken it below the bounce sparked by Thoma Bravo’s bid last month. Some investors say that there is a suspicion that the US technology investor had walked away having looked at the company’s data and seen something it did not like.
Others argue that this did not seem to tally with how a mergers and acquisitions process worked. Businesses do not share their sensitive data until a price or a term sheet is on the table. It is more likely that the deal fell apart because the two parties could not agree on a price, they suggest.
Darktrace uses artificial intelligence and machine learning to detect cyberattacks and vulnerabilities inside computer systems. This is supposed to be faster and more effective than building a “wall” around networks in the hope that nothing penetrates it.
Although the accounting reinstatement amounts to a relatively small sum and there is no suspicion of malpractice, the error may have reawakened the spectre of the accounting fraud at the software business Autonomy. Mike Lynch, Autonomy’s founder, was also one of the founders of Darktrace and remains a shareholder.
Lynch, 56, faces charges of wire and securities fraud in America in relation to the $11 billion deal to sell Autonomy to Hewlett-Packard (HP) in 2011. The judge hearing the case ruled that Lynch and his chief financial officer had routinely inflated revenues. HP argued that as a consequence it had overpaid for the business.
Lynch denies the charges and is fighting extradition to the US where, if convicted, he could face a 20-year prison term.
His historic association with Darktrace has continued to loom over the business and is frequently raised by its critics. One investor recently said that an advantage of selling Darktrace would be to “wipe the slate clean” of his involvement.
The hedge fund Shadowfall has been a vocal critic of the business, partly because of the management’s links to Lynch. It has also expressed scepticism about the company’s customer numbers and investment in research and development.
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