A US hedge fund has been embroiled in an extraordinary war of words with THG founder Matt Moulding after he criticised their ‘attack’ 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’s 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  called on UK regulators to take action over Quintessential Capital Management’s ‘attack’ in aa typically forthright LinkedIn blog.

He claimed: “Through wild claims they create fear, panic and a stampede, making shares plummet.”

But the row escalated when Gabriel Grego, founder of QCM, hit back over Moulding’s claims in an email to BusinessCloud.

He also posted the same comments in response to Moulding’s LinkedIn blog– prompting an extraordinary war of words.

Moulding calls for action over Darktrace ‘attack’

Grego said he wanted to clarify ‘our stance’ and ‘correct some misunderstandings’.

Grego wrote: “We 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.

“The conclusions shared were made by Darktrace insiders, thereby lacking the impartiality necessary for transparent evaluation.

“Contrary 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.

“The 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.”

Grego also hit back at Moulding’s accusations of ‘short selling’, which is when investors profit if the value of an asset falls.

“While 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,” said Grego.

“The 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.

“In conclusion, Quintessential Capital Management remains committed to responsible investing and deep due diligence.

“We 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.”

Sour grapes

Moulding replied by saying it sounded like ‘sour grapes’.

He replied: “I doubt anyone believes Darktrace have anything left to answer, reflected in the huge share price bounce since your attack. But that’s for you guys to debate.

“Given 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’s really behind these actions and who’s benefiting. After all, the public can see the real backers of LSE companies.

“Also, 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.

EY concludes review into Darktrace finances

“An 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.”

BusinessCloud asked Grego how many shares QCM sold in Darktrace and how much money they made on the short sell but hasn’t had a reply.

Following EY’s report Darktrace said: “Neither management, nor the board consider EY’s report to have any impact on Darktrace’s previously filed public company financial statements nor to change their belief that those financial statements fairly represent Darktrace’s financial position and results.”