Cirata shares rise as FCA closes fraud investigation into former Wandisco

Shares in Cirata rose 1.8% to 20p after the Financial Conduct Authority announced it was closing its two-year fraud investigation into the software firm without taking further action. The decision marks a turning point for the Sheffield-based company, formerly known as Wandisco, which saw its stock collapse from £13 to pennies overnight in March 2023 after admitting to inflating sales figures by millions.

Background and Context

The scandal erupted in March 2023 when Wandisco disclosed “significant irregularities” surrounding a senior salesperson and their purchase orders, related revenue, and bookings. The company immediately suspended trading of its shares, cut approximately a third of its workforce, and withdrew its 2022 financial guidance. An internal investigation was launched to determine the company's “true financial position” after discovering that sales recorded by an employee appeared to have been substantially inflated.

Key Figures and Entities

The crisis prompted a complete overhaul of Wandisco's leadership. The company appointed Ken Lever, former chair of waste management firm Biffa, as interim chair to lead the fraud investigation alongside non-executive director Peter Lees and audit committee chair Karl Monaghan. In a bid to distance itself from the controversy, the company rebranded to Cirata in 2023, bringing in Stephen Kelly, former boss of software firm Sage, as the new chief executive. As reported by City AM, Kelly stated that the announcement “heralds one sad chapter closed and a new chapter beginning.”

Legal and Financial Mechanisms

Wandisco's internal investigation revealed the extent of the financial misstatement. Revenue for 2022 should have been $9.7m instead of the reported $24m, while bookings ought to have been $11.4m rather than $127m. The discrepancy centered around false purchase orders and sales bookings that had been recorded by the employee in question. The Financial Conduct Authority subsequently launched its own investigation, examining potential breaches of financial reporting and market abuse regulations.

International Implications and Policy Response

The case highlights ongoing challenges in corporate governance and financial reporting within the UK's technology sector. The FCA's decision not to pursue further action raises questions about the effectiveness of regulatory oversight in detecting and preventing corporate fraud. The incident has also drawn attention to the importance of robust internal controls and independent audit mechanisms, particularly for publicly traded technology companies where revenue recognition practices can be complex and opaque.

Sources

This report draws on company announcements, Financial Conduct Authority statements, and reporting by City AM. The information covers events from March 2023 through the present day, including corporate filings, stock market data, and official statements from Cirata executives.