Quindell's days are numbered

If rumours are to be believed, Quindell's days as a quoted company are nearing an end. Three years and four months after reversing into AIM-listed shell Mission Capital, the controversial company is apparently in talks about a management buyout (MBO) to take it private. Given the knives are out for the insurance outsourcer, that may be the best thing for all concerned.

Quindell chiefs are said to be chatting with a number of hedge funds who would provide financial backing for a MBO, led by founder and chairman Rob Terry. "It's something they've got to sensibly consider at this stage," a source told Interactive Investor. "The way the shares are reacting, even a great trading update is unlikely to see the shares coming back that strongly to levels seen previously."

Quindell shares have halved just a week after the company was forced to explain a complicated share deal by Terry, finance chief Laurence Moorse and non-exec Steve Scott. The trio have effectively sold shares to Equity First Holdings (EFH) in return for a "loan" to buy more shares at current prices. But the shares have fallen further since, and they're now deep in margin call territory. That means they'll either have to sell more shares to EFH, or hand over cash. Ouch.

(click to enlarge)

And the resignation of joint broker Canaccord Genuity, confirmed Monday morning, looks bad. It plunged Quindell shares to a new three-year low of 52p, and raises further questions about the firm's relationship with the City. Canaccord handed in its notice on 21 October, which likely coincided with negotiations between Quindell and EFH over the structure of the controversial share deals. Canaccord's resignation is effective today.

Sources say they are not aware of any "bust-up" between Canaccord and Quindell, but it's no secret that the Quindell account is one of the more difficult contracts in the Square Mile.

Despite being comfortable with financial forecasts, Quindell has consistently failed to endear itself to the City and become a favourite among short-sellers. Few believe in the company's revenue model, and clearly doubt it will do the numbers.

For shareholders and other investors, the message is "don't fight the market." It's an old adage, but one that proves spot on time and again. It doesn't matter what an investor might think, if the weight of the market (sentiment) is against the stock, it's only going one way.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.