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Quindell

PwC rides in to tidy up at Quindell

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8th Dec 2014
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AIM-listed insurance and legal conglomerate Quindell has turned to Big Four accountant PwC to help it out during a torrid period at the hands of shareholders.

The company’s shares dropped 10% to 50p on Monday morning after a trading statement revealed that Quindell had called in PwC to conduct an independent review of its “accounting policies and expectations”. The price recovered later in the day, but still remains more than 90% down on highs of 650p recorded in February and April.

Since then the company became embroiled in a libel suit against US analyst Gotham City Research, and seen the departure of founder Rob Terry following a series of controversial share deals. Quindell also announced at the end of November that group finance director Laurence Moorse agreed to leave after the 2015 AGM.

The trading statement insisted that performance was robust in both its digital services and professional services divisions, with the latter showing a cash flow growth from the cases it has been handling.

In the company’s trading statement, interim non-executive chairman David Currie said: “The appointment of PwC to conduct an independent review is the natural next step to give additional support to the board’s confidence in the business and will also assist the company in assessing its future strategy and outlook. The search for a permanent chairman and new board members is ongoing and we will update shareholders as appropriate.”

The saga is so complicated (and shrouded in legal action) that it would be prudent not to speculate too deeply on the nature of the business review taking place. While waiting for PwC to report, interested readers can follow a detailed chronology assembled by Dan McCrum on FT.com’s Alphaville site.

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David Winch
By David Winch
09th Dec 2014 09:25

Who's initiative?

One of the things which remains unclear is whether the idea to obtain an independent review originated with the board of Quindell or its bankers.

No doubt PwC will move pretty fast to prepare a report and then Quindell will make a further announcement.

David

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By User deleted
09th Dec 2014 11:21

Directors' conduct [moderated comment]

Why turn to PwC at this stage – surely the best solution would have been to avoid getting in the situation in the first place. 

The Gotham City Research report ‘A Country Club Built on Sand’ raised many of these issues – and Quindell shares have been shorted by a number of traders – even before the Gotham report was published.

[Ed's note - as our report makes clear, the Gotham paper has been the subject of a UK libel action that Quindell won. Some portions of this post have been moderated to protect the original poster and AccountingWEB from the risk of similar action.]

Rob Terry (founder/Chairman), Laurence Moorse (finance director) and Steve Scott (non-exec) are all leaving because of their involvement with Equities First and doubts over Quindell's investor disclosure - although some not as quickly as others & possibly with pay-offs - EH!

Canaccord Genuity resigned as Quindell's joint broker and financial adviser in October 2014 after working for the company for less than 18 months. Hhowever, conveniently just before a loan arrangement by the three aforementioned individuals on Nov 5  – leaving Cenkos Securities (AIM) as their only broker and whose shares took a large knock-on hit (16%)

The three directors loan involved using some of their existing as security to fund purchase of new shares – however, after the Regulator became involved they were admitted they had sold shares as well as buying them; with a promise to re-purchase on expiry of the 2 year loan – oops! embarrassment for their advisors

At this point Mr Terry was caught out by a drop in the share price and subsequent margin call & as a result relinquished his right to purchase the shares rather than meet the margin call.

Whatever happened to the old fashioned concept of being 'hammered'?

Backtrack – History

Quindell was floated 3 years ago, although it became apparent that the management team behind the company was the same one behind The Innovation Group (TIG) a decade ago & its subsequent crash – whose float & ensuing disatser handled Rob Terry around £100m - nice work if you can get it!

Shares went from 229 to 900, followed by warning in 2002 and then the shares bombed. Lots of staff sackings and Mr Terry received £500k payoff

However, along the way in this debacle Terry & Scott (see para 1) had taken out a huge hedge against a fall in the share price with UBS

These two (Terry & Scott) then re-surfaced with Quindell & implemented their share loan deal with Equity First Holdings.

Oh! And by the way - Laurence Moorse, also involved in the Quindell share loan deal from Equity First, was previously the UK finance director of TIG

Canaccord Genuity

Whose employee Kevin Ashton (rumour has it) raised concerns about Quindells governance, acquisitions & profitability in April also advised Canaccord  to resign as joint broker – hours before the Gotham report was published. Ashton was subsequently asked by Canaccord to investigate Quindell further & came back with a clean bill of health and Quindell was then re-instated as a buy by another analyst at Canaccord

Ashton has now left Canaccord and Terry is thought to have threatened to dismiss Canaccord if their adverse research was published

These are the type of antics that Regulators should pick up - but rarely do.

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