On Tuesday morning AIM listed Quindell plc was a “technology enabled claims outsourcing business”, whatever that is, worth £2.4bn.
Then Gotham City Research announced an initiation of coverage on the company with a target price of 3p and, well…
Market cap at pixel time was somewhere in the region of £1.3bn as the share price bounced around the 23p-ish level.
Check out their research for the full takedown, but Gotham alleges that somewhere between 42 per cent and 80 per cent of Quindell’s profits are “suspect”.
Without attesting to the quality of the research, which goes into great detail about the accounting, two things immediately jump out: Quindell listed via reverse merger in 2011, since when it has had three different auditors.
Other tit-bits include the allegation that the New York office does not exist, and that while the chief executive invested £11.5m into the company between 2001 and 2005, the company spent the same amount building a country club.
We’ll update this with any response from Quindell as soon as we see it.
Update (3pm BST): we’ve seen it.
The Board of Quindell Plc (AIM: QPP.L), is aware of the publication today by Gotham City Research LLC. The Board rejects the assertions raised in this note and considers the note to be highly defamatory, deliberately misrepresentative and entirely rejects the conclusions that are made. A more detailed response shall be announced before the end of this week. In the meantime the Company is also consulting its legal advisors on what immediate action can be taken against Gotham City Research LLC and is reporting coordinated shorting activity to the appropriate authorities.
In the Company’s annual results for the year to 31 December 2013, released on 31 March and prepared following the appointment of the Company’s auditors, KPMG LLP, Quindell reported revenue of £380.1 million and profit before tax of £107.0 million. Since that time, the Company has released a 2014 Q1 trading statement, which referred to gross sales for the Group totalling £162.9 million and the Group having cash at 31 March of approximately £150 million. The Board remains confident of meeting or exceeding market expectations in all key performance indicators in 2014 and all other initiatives being pursued remain on track.