A US hedge fund has been embroiled in an extraordinary war of words with THG founder Matt Moulding after he criticised their 鈥榓ttack鈥� on UK-based cyber security firm Darktrace.
On Saturday, New York-based Quintessential Capital Management (QCM) renewed its calls for Darktrace to publish a report by EY in its entirety – despite the fact it cleared the Cambridge-based firm of any fraud.
QCM accused Darktrace of inflating its growth rates prior to its IPO in April 2021, prompting Darktrace to commission an independent review by EY into the short seller鈥檚 allegations – but it found no evidence of fraud after a five-month investigation.
The row was reopened at the weekend when THG’s outspoken founder聽 called on UK regulators to take action over Quintessential Capital Management鈥檚 鈥榓ttack鈥� in aa typically forthright LinkedIn blog.
He claimed: 鈥淭hrough wild claims they create fear, panic and a stampede, making shares plummet.鈥�
But the row escalated when Gabriel Grego, founder of QCM, hit back over Moulding鈥檚 claims in an email to 老九品茶Cloud.
He also posted the same comments in response to Moulding鈥檚 LinkedIn blog鈥� prompting an extraordinary war of words.
Grego said he wanted to clarify 鈥榦ur stance鈥� and 鈥榗orrect some misunderstandings鈥�.
Grego wrote: 鈥淲e echo Mr Moulding’s concern for integrity in the market, but it’s essential to note that the EY report, despite our vocal requests, has not been made public.
鈥淭he conclusions shared were made by Darktrace insiders, thereby lacking the impartiality necessary for transparent evaluation.
鈥淐ontrary to the recent narrative, none of the facts highlighted by QCM have been refuted. Darktrace’s response seems to minimise the impact of our findings rather than directly addressing them. Our investigation was conducted with diligence and responsibility, aimed at upholding market integrity.
鈥淭he acknowledgment of irregularities and areas for improvement in Darktrace’s systems, processes, or controls further emphasises the legitimacy of our concerns. These findings should not be disregarded but rather thoroughly investigated by relevant authorities.鈥�
Grego also hit back at Moulding鈥檚 accusations of 鈥榮hort selling鈥�, which is when investors profit if the value of an asset falls.
鈥淲hile we understand THG’s frustrations regarding short sellers, it is essential to recognise the vital role that short selling plays in market efficiency and price discovery,鈥� said Grego.
鈥淭he short thesis on THG’s stock, validated by a significant drop in its value, reflects underlying concerns that cannot simply be attributed to malicious intent.
鈥淚n conclusion, Quintessential Capital Management remains committed to responsible investing and deep due diligence.
鈥淲e believe that open and honest discourse, guided by facts and impartial investigation, is the path to a robust and transparent market. We invite all parties to approach this matter with the same level of integrity and openness.鈥�
Sour grapes
Moulding replied by saying it sounded like 鈥榮our grapes鈥�.
He replied: 鈥淚 doubt anyone believes Darktrace have anything left to answer, reflected in the huge share price bounce since your attack. But that鈥檚 for you guys to debate.
鈥淕iven 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鈥檚 really behind these actions and who鈥檚 benefiting. After all, the public can see the real backers of LSE companies.
鈥淎lso, maybe share a full history of your short positions against Darktrace, and other companies on the LSE, so a clear picture of events can be seen.
鈥淎n answer as to why you decided to close the short within 48 hours of your wild claims, despite spending weeks writing a 70 page damming report would be interesting. Especially given Quintessential was so certain that Darktrace could go bust.鈥�
老九品茶Cloud asked Grego how many shares QCM sold in Darktrace and how much money they made on the short sell but hasn鈥檛 had a reply.
Following EY鈥檚 report Darktrace said: 鈥淣either management, nor the board consider EY鈥檚 report to have any impact on Darktrace鈥檚 previously filed public company financial statements nor to change their belief that those financial statements fairly represent Darktrace鈥檚 financial position and results.鈥�