AIM-listed alternative business structure Quindell Portfolio has been forced to issue a statement that it knows of “no valid reason” for the sudden 45% fall in its share price.
Quindell was trading at 13.25p at the end of last week, but since issuing its 2012 results on Tuesday, the price had fallen to 7.34p by the end of yesterday, the lowest since August.
According to the Financial Times, analysts have questioned how the outsourcing company funded its acquisition last year of Accident Advice Helpline. Its results included a £13.3m derivative contract, which the paper said was “highly unusual”.
The FT said: “The equity swap contract allowed the company to finance the acquisition by placing £17m worth of new shares with an unnamed institution, while offering the investor protection against a fall in the share price.
“Since the contract was entered into, Quindell’s shares have tumbled more than 40%, leaving the company with potential losses of several million pounds.”
In a “clarification” issued yesterday to the market, Quindell said: “The company is aware of recent press speculation regarding the equity swap and an active short position in relation to the company’s ordinary shares. In light of this, the board wishes to clarify that further to its recently reported record results, the company has a strong balance sheet and continues to trade profitably with significant traction in the insurance sector.
“The company knows of no valid reason for the recent share price decline. Furthermore, the equity swap asset, which has also been subject to speculation, accounts for a small part of the group receivables and is not a material contract in relation to the size of the group.
“This was issued as part of the funding for the acquisition of Accident Advice Helpline, announced on 3 December 2012 and was deemed to be the least dilutive funding mechanism at this time. It is not currently being exercised, and the company believes that the counterparty will continue to not make any material transactions in respect of the company’s ordinary shares unless the share price is at substantially higher levels.”
The FT said Quindell’s falling share price “has also focused investors’ attention on its strategy of share-funded acquisitions”.
The results said: “Since our IPO two years ago now, our share price has significantly outperformed the market with an increase of 10.4% for the FTSE Allshare and over 400% for Quindell in the same period. This has inevitably led to a certain amount of profit taking and the pace of acquisitions has caused nervousness with some investors, however our clients in the industry clearly understand the lead that we have established, as demonstrated by our significant contract wins announced recently, with the potential to deliver hundreds of millions of recurring revenue per annum with a long term guidance of 20-25% EBITDA margin.”