Huge volatility on Quindell rumour mill
Nov 28, 2014 at 10:02 am in AIM by contrarianuk
If you’re a trader and you want volatility then you can’t get much more volatile than AIM listed Quindell. Last week its shares collapsed as low as 43p following news that Chairman Rob Terry and two other directors had resigned from the board after a botched share scheme with Equity First Holdings. On the 20th November the company was forced to issue a rebuttal of rumours that it was trying to sell its stake in National Accident Repair Group because of a cash crunch helping the price to rebound back to 91p at one point But its been downhill in recent days with plenty of negative stories in the weekend press (a lot of coverage in the Sunday Times), a negative broker note from Cannacord (who used to be Quindell’s broker until recently) putting the price target under review and then a story last night from iii’s Editor Lee Wild published just after 4pm which helped the shares close back at 57p. Quite a move in the last few days!
Wild wrote:
Quindell loses huge contract, says source
Quindell (QPP), the controversial insurance outsourcer, has lost a major contract with a large claims management firm based in the North West of England, Interactive Investor understands.
A source claiming to be close to senior management told Interactive Investor that Quindell has lost the contract, signed on 2 May 2013, with one of the UK’s largest accident management companies.
The deal was originally expected to deliver over 1,000 injury claims per month to the group on a six-month rolling contract, but our mole tells us it was nearer 1,500. If confirmed, it reinforces our fears that the negative publicity around Quindell and corporate stigma may make it more difficult to win new contracts and retain existing ones.
There’s “paranoia and panic” at Quindell following a board meeting this morning, we’re told. The share price is lower, too, down 15% Thursday at 61p.
But it gets worse. According to the source, Quindell will not pay anyone until next year. If true, it may give the impression that Quindell’s cash position is far better than the reality. It’s unclear, however, whether this means it is not paying the bills. There have already been rumours suggesting that the company may have to raise extra cash, either by selling assets – Quindell recently denied planning to offload its 25% stake in National Accident Repair- or through a fundraising.
Part of the problem is Quindell’s business model, which recognises the revenue in its accounts way before it receives payment for the job. That means it might end up needing more cash to tide it over until that money comes in.
After several telephone conversations with a Quindell spokesperson, we received this emailed response: “It’s no comment from Quindell.”
A couple of hours later iii wrote:
Quindell denies contract loss
Controversial insurance outsourcer Quindell (QPP) has denied rumours that a large contract with one of the North West’s biggest claims management companies has been lost.“There is no truth at all to these rumours,” a company spokesperson said in an email to Interactive Investor. The response came over three hours after the company was given the chance to refute the claims, but decided instead not to comment.
Quindell shares had already tumbled by 15% amid speculation about another serious slip-up.
A source claiming to be close to senior management told Interactive Investor that Quindell had lost the contract, signed on 2 May 2013, with one of the UK’s largest accident management companies.
This was followed by an RNS from Quindell this morning saying that,” Quindell Plc (AIM: QPP.L), a market leading global provider of professional services and digital solutions, confirms that, contrary to speculation, it has not lost a major contract with a large claims management firm based in the North West of England and relationships with partners and customers remain strong. Further, the Company confirms that the other negative statements in the same article are also untrue.”
The shares have bounced back today to 63p after moving much higher early in the session. The rumour mill is flat out at the moment with Quindell. iii’s allegations of a contract loss, customer dissatisfaction, boardroom upheaval and deferment of salary payments due to cash problems seem to be firmly denied by the company this morning and it would be interesting to hear from iii what the source of the allegations was. The story certainly helped to stoke the considerable fear around these shares. With the next set of financial results due mid-late December its difficult to know who to believe at the moment with some saying that the shares are worthless and others that they should be worth multiples of the current price. Without the numbers its difficult to make a rational, fact based decision but the last set of numbers published in October seemed to indicate that all was well. To justify bankruptcy things will have needed to have seriously deteriorated in the last few months and the directors will have to have committed fraud (again as some have suggested). As recently as a few weeks ago, directors like Rob Fielding, Group Chief Exec, were saying in RNS related to share purchases that they were confident of the company meeting full year expectations. The directors and ex-directors of the company would have lied so blatantly that they would face jail. Would they be so brazen in the face of the law??? – I suppose anything’s possible!
Yesterday the company was taking part in further procedural processes associated with the claim for damages against Gotham and it seems likely that an award will be made soon but Quindell will probably struggle to recover any money from the US based outfit since its assets are likely to be out of reach of British jurisdiction.
With all the controversy surrounding Quindell, one side sooner rather than later will be proved right and December should prove enlightening in terms of the search for a new Chairman and the much anticipated financial update. Who knows where the share price is heading but expect the same outrageous volatility as the media and online speculation continues. A great trading share whatever happens in the next few weeks as either the allegations of fraud are proved right or the company itself puts the worries about its finances finally to bed. David Currie has plenty to do to restore investor confidence after so much negative press in recent times.
Contrarian Investor UK
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