A prominent UK cybersecurity stock is under attack from short sellers. Here’s what you need to know

Published

3 years ago

February 6, 2023

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Darktrace, one of the U.K.’s largest cybersecurity companies, was founded in 2013 by a group of former intelligence experts and mathematicians.

Omar Marques | SOPA Images | LightRocket via Getty Images

Cybersecurity company Darktrace, one of the U.K.’s most prominent tech names, has found itself under attack from short sellers.

The company, whose tools allow firms to combat cyberthreats with artificial intelligence, was last week targeted in a report by New York-based asset manager Quintessential Capital Management.

QCM, whose stated aim is “exposing fraud and criminal conduct in public companies around the world,” claims it has had a 100% success rate in its activist campaigns.

The company told Reuters it holds a short position of 1.3% in Darktrace shares.

London-based hedge fund Marshall Wace also shorted Darktrace, according to data site Breakout Point.

Short selling is a strategy in which investors bet on the price of a stock going down in value. A trader borrows the stock and then sells it on the assumption that it will fall, before buying it back at a discounted price and pocketing the spread.

What is Darktrace?

Darktrace, one of the U.K.’s largest cybersecurity companies, was founded in 2013 by a group of former intelligence experts and mathematicians.

The Cambridge-headquartered company says its technology uses AI to detect and respond to cyberthreats in a business’ IT systems.

The company floated on the London Stock Exchange in 2021, and its debut was seen as a key victory in the U.K.’s bid to lure more high-growth tech startups to the London market after its withdrawal from the European Union.

The stock’s performance following the listing has been underwhelming. After initially rising to an all-time high of £9.45 ($11.58) in October 2021, Darktrace shares have since plunged dramatically in tandem with a broader slump in global tech stocks.

As of Monday afternoon, Darktrace shares were trading at a price of £2.32, down 37% in the last 12 months.

Darktrace share price performance in the last 12 months.

In August, the firm opened takeover talks with U.S. private equity firm Thoma Bravo. However, Thoma Bravo walked away from the deal a month later after the two sides failed to reach an agreement.

Why is it under attack?

On Tuesday, U.S. hedge fund QCM said it had taken a short position out against Darktrace and published a lengthy report detailing alleged flaws in Darktrace’s accounting.

QCM said that, following an investigation into Darktrace’s business model and selling practices, it was “deeply skeptical about the validity of Darktrace’s financial statements” and believed sales and growth rates may have been overstated.

“We would like to give our strongest possible warning to investors and believe that DT’s equity is overvalued and liable to a major correction, or worse,” QCM said in the report.

Darktrace was accused by QCM of engaging in “channel stuffing” and “round-tripping” — activities that artificially inflate a company’s reported sales — involving individuals with ties to organized crime, money laundering and fraud.

Darktrace didn’t directly address those allegations. On Wednesday, the firm’s CEO Poppy Gustafsson issued a statement defending the company from what she called “unfounded inferences” made by QCM.

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Separately, QCM suggested Darktrace may have inflated its revenues by booking unearned revenues as actual sales.

The company occasionally books revenue from payments for contracts it receives before delivering its service to clients as deferred revenue, according to the report.

This is not uncommon among subscription-based software companies. However, QCM noted deferred revenue as a percentage of Darktrace’s sales had dropped between 2018 and 2022, suggesting the firm “may have increasingly been booking unearned revenue as actual sales.”

In response, Darktrace said: “Rarely, customers will pay full contract values in advance but because this is infrequent, non-current deferred revenue balances will decline as these contracts run down unless there is another unusual, large, in-advance payment.”

QCM alleged Darktrace may have tried to fill gaps in its receivables left by clients dropping out of sales negotiations through marketing sponsorships with indebted resellers and using shell companies to pose as phantom clients.

“Organisations that transact with the channel will typically co-host marketing events with their partners. Partner marketing events are a normal course of business for almost all software businesses and Darktrace is no different,” Darktrace said Wednesday.

“This has been, and remains, a very small part of Darktrace’s marketing and the costs of them over the last five years has consistently been substantially below 0.5% of Darktrace’s revenue,” Darktrace added.

Darktrace was not immediately available for comment when contacted by CNBC.

Separately Wednesday, Darktrace said it would embark on a share buyback worth up to £75 million ($92 million) to be completed no later than Oct. 31, 2023.

The Lynch connection

It’s worth noting that, even before the QCM report, there were clouds hanging over Darktrace’s business. Analysts have criticized the company over an allegedly aggressive sales culture and doubts over the value of its technology.

Darktrace is also backed by Mike Lynch, the British tech tycoon.

Mike Lynch, former CEO of Autonomy.

Hollie Adams | Bloomberg via Getty Images

Lynch founded the enterprise software firm Autonomy, whose sale to Hewlett-Packard was mired in scandal over accusations that Lynch plotted to inflate the value of Autonomy before it was bought by HP for almost $11 billion in 2011.

In 2022, a British judge ruled in favor of HP in a civil fraud case against Lynch. Lynch, an influential figure in the U.K.’s tech scene, faces a possible criminal trial in the U.S. after the U.K. government approved his extradition last year.

He has repeatedly denied the allegations.

Several executives at Darktrace, including Gustafsson and Chief Strategy Officer Nicole Eagan, previously worked for Autonomy.

The QCM report also raised concerns over the connections between Darktrace and Autonomy.

“Darktrace has been led or strongly influenced by many of the very same individuals that participated in the Autonomy debacle,” QCM said in its report.

“If our allegations are confirmed, we expect Darktrace to follow the same tragic destiny of its predecessor, Autonomy,” QCM said.

Lynch is reportedly no longer involved with Darktrace’s management, but remains a significant shareholder.

Lynch is no longer involved with Darktrace’s management, but remains its sixth-largest shareholder, according to Refinitiv Eikon data.

Meanwhile, Darktrace is also suffering from uncertainty related to the wider macroeconomic environment. The company lowered its forecast for annual recurring revenue growth for the year ending June 2023 to between 29% and 31.5%, down from an earlier forecast of 31% to 34%, citing weaker customer growth.

Technology

Google says Fox channels to go dark on YouTube TV if agreement isn’t reached

Published

6 hours ago

August 25, 2025

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Google says Fox channels to go dark on YouTube TV if agreement isn't reached

Nurphoto | Nurphoto | Getty Images

Google-owned YouTube on Monday said it may remove channels including Fox Broadcast Network, Fox News and Fox Sports from its TV streaming platform if it doesn’t reach an agreement with Fox Corporation.

YouTube TV’s renewal date with Fox is coming on Wednesday, and while the two companies have been in ongoing negotiations, they’ve been unable to reach a deal, the YouTube team wrote in a blog post. The company also emailed YouTube TV subscribers about the potential fall out with Fox.

“Fox is asking for payments that are far higher than what partners with comparable content offerings receive,” YouTube wrote in the blog. “Our priority is to reach a deal that reflects the value of their content and is fair for both sides without passing on additional costs to our subscribers.”

If YouTube is unable to reach a new agreement by 5 p.m. Eastern on Wednesday, the Fox channels will become unable on YouTube TV, the Google company said. YouTube pays broadcasters like Fox to carry their channels, and a blackout could have implications on advertisers and millions of viewers who cut their cords to stream Fox’s various channels on YouTube TV.

“While Fox remains committed to reaching a fair agreement with Google’s YouTube TV, we are disappointed that Google continually exploits its outsized influence by proposing terms that are out of step with the marketplace,” the media company said in a statement.

The Fox standoff represents the latest contract dispute between content companies and delivery networks as viewers increasingly ditch cable.

In February, Paramount Global notified YouTube TV subscribers that more than 20 channels including CBS, BET, Comedy Central, MTV and Nickelodeon could go dark on the service if the two didn’t reach a deal. Shortly after, YouTube TV and Paramount announced a multi-year distribution deal.

YouTube TV’s base plan costs $82.99 per month and includes over 100 live channels and unlimited cloud DVR. YouTube said a key part of its commitment to users is its partnership with content providers like Fox, “which allows us to carry a wide variety of channels.”

If Fox does go offline for an extended period of time, YouTube will give its members a $10 credit, the Google company wrote. Users will also be able to watch Fox content by signing up for Fox One, Fox’s streaming service, the blog said.

YouTube recently overtook Netflix, which has a market cap of $515 billion, as the top streaming platform in terms of audience engagement. Google does not provide official subscriber numbers for YouTube TV, but in its February 2024 letter, YouTube CEO Neal Mohan announced that the service had more than 8 million subscribers. MoffettNathanson principal analyst Michael Nathanson has estimated that YouTube TV has approximately 9.4 million paying subscribers.

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Technology

Musk’s xAI sues Apple, OpenAI alleging anticompetitive scheme harmed X, Grok

Published

14 hours ago

August 25, 2025

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Musk’s xAI sues Apple, OpenAI alleging anticompetitive scheme harmed X, Grok

Elon Musk, CEO of SpaceX and Tesla, attends the Viva Technology conference at the Porte de Versailles exhibition center in Paris on June 16, 2023.

Gonzalo Fuentes | Reuters

Elon Musk‘s xAI sued Apple and OpenAI on Monday, accusing the pair of an “anticompetitive scheme” to thwart artificial intelligence rivals.

The lawsuit, filed by Musk’s AI startup xAI and its social network business X, alleges Apple and OpenAI have “colluded” to maintain monopolies in the smartphone and generative AI markets.

Musk’s xAI acquired X in March in an all-stock transaction.

It accuses Apple of deprioritizing so-called “super apps” and generative AI chatbot competitors, such as xAI’s Grok, in its App Store rankings, while favoring OpenAI by integrating its ChatGPT chatbot into Apple products.

“In a desperate bid to protect its smartphone monopoly, Apple has joined forces with the company that most benefits from inhibiting competition and innovation in AI: OpenAI, a monopolist in the market for generative AI chatbots,” according to the complaint, which was filed in U.S. District Court for the Northern District of Texas.

An OpenAI spokesperson said in a statement: “This latest filing is consistent with Mr. Musk’s ongoing pattern of harassment.”

Representatives from Apple didn’t immediately respond to a request for comment.

The Tesla CEO launched xAI in 2023 in a bid to compete with OpenAI and other leading chatbot makers.

Nvidia’s new ‘robot brain’ goes on sale for $3,499 as company targets robotics for growth

Published

15 hours ago

August 25, 2025

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Nvidia's new 'robot brain' goes on sale for ,499 as company targets robotics for growth

Jensen Huang, CEO of Nvidia, is seen on stage next to a small robot during the Viva Technology conference dedicated to innovation and startups at Porte de Versailles exhibition center in Paris, France, on June 11, 2025.

Gonzalo Fuentes | Reuters

Nvidia announced Monday that its latest robotics chip module, the Jetson AGX Thor, is now on sale for $3,499 as a developer kit.

The company calls the chip a “robot brain.” The first kits ship next month, Nvidia said last week, and the chips will allow customers to create robots.

After a company uses the developer kit to prototype their robot, Nvidia will sell Thor T5000 modules that can be installed in production-ready robots. If a company needs more than 1,000 Thor chips, Nvidia will charge $2,999 per module.

CEO Jensen Huang has said robotics is the company’s largest growth opportunity outside of artificial intelligence, which has led to the Nvidia’s overall sales more than tripling in the past two years.

“We do not build robots, we do not build cars, but we enable the whole industry with our infrastructure computers and the associated software,” said Deepu Talla, Nvidia’s vice president of robotics and edge AI, on a call with reporters Friday.

The Jetson Thor chips are based on a Blackwell graphics processor, which is Nvidia’s current generation of technology used in its AI chips, as well as its chips for computer games.

Nvidia said that its Jetson Thor chips are 7.5 times faster than its previous generation. That allows them to run generative AI models, including large language models and visual models that can interpret the world around them, which is essential for humanoid robots, Nvidia said. The Jetson Thor chips are equipped with 128GB of memory, which is essential for big AI models.

Companies including Agility Robotics, Amazon, Meta and Boston Dynamics are using its Jetson chips, Nvidia said. Nvidia has also invested in robotics companies such as Field AI.

However, robotics remains a small business for Nvidia, accounting for about 1% of the company’s total revenue, despite the fact that it has launched several new robot chips since 2014. But it’s growing fast.

Nvidia recently combined its business units to group its automotive and robotics divisions into the same line item. That unit reported $567 million in quarterly sales in May, which represented a 72% increase on an annual basis.

The company said its Jetson Thor chips can be used for self-driving cars as well, especially from Chinese brands. Nvidia calls its car chips Drive AGX, and while they are similar to its robotics chips, they run an operating system called Drive OS that’s been tuned for automotive purposes.