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Quindell misleads investors; shares suspended

Kit Klarenberg
Written By:
Kit Klarenberg
Posted:
Updated:
02/04/2015

Quindell has admitted shareholders were misled over the profitability of its legal division, which is being sold to Slater & Gordon for a reported £637m.

The error, which Quindell spokespeople claim was the result of a genuine clerical error, saw Quindell underestimate the value of its legal arm by 16 per cent – the equivalent of £14m – in a document sent to investors, meaning it is scheduled to sell off more of the company’s profits than first anticipated. The error means that the wing being sold accounts for 94 per cent of Quindell’s profits.

Acting chairman of the firm David Currie admitted in an official announcement that “there was a failure fully to transcribe profits related to entities forming part of the disposal as disclosed in the circular…as a result, profit before tax generated actually stood at £130.7m in the six months to the end of June last year, rather than the £113.4m noted in the circular.”

As a result of the blunder, Quindell shares were suspended from trading for six hours on Wednesday morning. The London Stock Exchange were then forced to cancel a series of Quindell trades that had been erroneously processed after the suspension. When trading resumed, Quindell shares had fallen to 134.75p – this morning, shares had fallen further, to 130.81p.

An undisclosed source close to Quindell called the fiasco “a colossal c**k up”, but confirmed the Slater & Gordon deal would proceed as expected. If and when successful, the sale will net Quindell’s shareholders £500m – welcome relief after a year typified by scandal and controversy. Quindell shares hit a high of 656.25p at the beginning of last April; before

Investors are still waiting for the findings of an investigation by accountancy firm into the historic goings on at the company, whose shares touched a high of 656.25p

Before the month was over, US research house Gotham City Research published a damaging assessment of Quindell, which asserted that as much as 80 per cent of Quindell’s profits were “suspect”, and raised serious questions about founder Rob Terry’s business practices. The report wiped almost £1bn off Quindell’s market value in a day and resulted in Terry’s resignation; PwC subsequently launched an investigation into the company’s dealings.


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