What happens when THG’s founder Matt Moulding meets New York-based hedge fund Quintessential Capital Management (QCM)?

The answer is a spectacular war of words that has played out on social media over the weekend and got everyone talking.

At one point the hedge fund claimed short-selling was a good thing – prompting Moulding to reply: “Trying to argue your actions against LSE companies are a force for good is like a house burglar arguing he’s helping to declutter homes!”

The row has been extensively covered by BusinessCloud and at the heart of the row is Cambridge cyber security firm Darktrace, which was the subject of a highly critical 70-page report by QCM in January this year.

At the time the short seller said it was ‘deeply sceptical’ about Darktrace’s financial statements to shareholders.

It claimed Darktrace had included “simulated or anticipated sales to phantom end-users through a network of resellers” in its figures – something the company strongly refuted.

QCM is a short seller, meaning investors profit if the value of an asset falls.

Darktrace commissioned an independent review by EY into the allegations.

Although the EY investigation reported “a number of areas already known to Darktrace where systems, processes or controls could be improved” it found no evidence of fraud.

Moulding calls for action over Darktrace ‘attack’

That looked like it was end of the matter but the row exploded over the weekend when Moulding broke off from his summer holiday to criticise QCM’s ‘attack’ on Darktrace in his latest LinkedIn blog and called on UK regulators to take action on hedge funds.

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

That probably would have been the end of the matter but for the fact Gabriel Grego, founder of QCM, hit back over Moulding’s claims in an email to BusinessCloud.

He posted the same response on Moulding’s LinkedIn blog –  prompting an extraordinary public spat that resulted in a surge in popcorn sales.

In his email to BusinessCloud, 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 and had a clear dig at THG’s own falling share price since it listed.

In 2020 THG floated on the stock market to much fanfare at a share price of 500p. It currently stands at 87p.

“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.

US hedge fund and THG boss in war of words

“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.”

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.

“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.”

Grego responded for a second time by refuting Moulding’s claim that they decided to close the short within 48 hours and had another pop at THG’s share price.

“This is factually incorrect (we reduced the position, did not close it altogether),” he said “Not all short selling is malicious. A healthy market must include criticism as well.”

He added: “Using short-term price fluctuations as the ultimate metric what should people conclude about THG 90 per cent drop?”


Moulding dismissed the comments as ‘waffle’ and again called on the hedge fund boss to say who provided the money for QCM.

“Darktrace have gone above and beyond any LSE requirements, but you’re still unhappy and argue for more transparency,” he wrote.

“Instead of saying you’ve done what’s required, release full details of your short attack transactions, detailing each transaction. What’s there to hide?”

In his original blog Moulding claimed the hedge fund took a position that Darktrace’s shares would fall.

“And so, Quintessential sold c£25m of shares in Darktrace it didn’t own, a bizarre but legal transaction,” he claimed.

“The cost of making a £25m bet like this is likely just c£2k a day until the bet is closed.

“Because it’s so cheap, the returns are spectacular when shares fall. For pennies, you can make hundreds of millions by wreaking havoc against a company and its share price.”

BusinessCloud asked Grego how many shares QCM sold in Darktrace and how much money they made on the short sell.

He replied saying the numbers were ‘compatible’ with those quoted by Moulding but again rejected his claim that they closed their position within 48 hours.

“While we did reduce our exposure relatively quickly (mostly due to the fact that the stock began a sustained rally), we kept a large position open beyond one month after our campaign became public,” he said.

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.”

Moulding has been a big critic of the behaviour of hedge funds, media and bank analysts, who he has accused of creating negative coverage against listed companies, including THG.

Quintessential Capital Management describes itself as “aiming for exceptional returns through the application of value investing, shareholder activism and deep due diligence”.

It also confirmed in a tweet on July 18th: “Disclosure: we still hold a small short position on this name.”