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British-American cyber security company, Darktrace plc (Darktrace),  a shareholder revolt at its AGM on 4 November 2022, with 20.7% of votes cast against its remuneration report. This is a significant change from Darktrace’s , which saw a miniscule 0.13% of shareholders vote against its report.

In the announcement of its AGM results, Darktrace disclosed that 70% of the 20.7% dissent derived from only three shareholders. Two of the shareholders in question were husband and wife, former Darktrace co-founders Michael Lynch and Angela Bacares. Lynch is currently in the midst of a US-based legal battle. Darktrace notes it consulted extensively with shareholders and emphasises their overall acceptance of the report.

Lynch was found guilty of inflating the value of Autonomy Corporation PLC, a British based software company in January 2022. Hewlett-Packard (HP) won their civil fraud case against Lynch, after a high court ruled he had duped HP into paying £2.8bn for Autonomy (now called HP Autonomy). Lynch is now facing extradition charges to the US for a separate criminal trial on the same matter (for more information, see: Darktrace’s future appears murky as Thoma Bravo considers takeover). Darktrace  to have immediately distanced itself from Lynch in the aftermath of the judgment:

'Darktrace notes the recent share price movement and also media speculation about the company in relation to the civil proceedings in connection with the sale of Autonomy. Neither Darktrace nor any of its acting executives was a party to the civil proceedings. Neither Darktrace nor its acting executives are the target of any investigation. We see no link between Darktrace and the civil action against Dr Mike Lynch by Hewlett Packard or its subsidiaries. There has been no change to the prospects or trading of the business since our last update.’

The recent shareholder revolt comes after a difficult few months for Darktrace. The cyber security company saw its share price fall during mid-September 2022 after US private equity software firm, Thoma Bravo, pulled out of a takeover bid (for more information, see: Private equity group Thoma Bravo terminates takeover bid for Darktrace). Investors did not take kindly to the news, evidenced by the share price plummeting by more than 30% shortly after.

Despite this, as of 15 November 2022, the company’s share price had risen 16.2% from its mid-September slump. This may be partly due to the publication of Darktrace’s Q1 FY 2023 , which revealed a 37% boost in revenue when compared to Q1 FY 2022. One reason for this is the continued growth in Darktrace’s customer base, which has increased by 29.1% year-over-year. Additionally, Darktrace has released a new product, PREVENT, which provides predictive and preventative solutions to combat cyber-threats and business risk. PREVENT product sales are expected to start making 'positive contributions to the company’s ARR growth and net retention measures in the second half of FY 2023'.

However, the company has also highlighted that FY 2023 projected revenue growth will likely suffer from foreign exchange rate consequences as the strength of the dollar continues to rise. According to the company, this will likely have a negative impact on the company’s future reporting periods 'as recent and upcoming invoicing begins to contribute a greater proportion of Darktrace's FY 2023 revenue'.

Market Tracker will continue to monitor these changes.