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

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.

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.