Quindell: on the hard shoulder?

Quindell: A controversial stock this one, with fans and critics aplenty. It has expanded very rapidly from its corporate roots as a Hampshire golf course into technology based out-sourcing solutions for the insurance industry. Its problem is that it has been expanding so fast that it is in danger of tripping over its own feet. Earlier this year Gotham City Research produced a note pulling apart Quindell’s accounting policies and questioning the value of many of its acquisitions. Whilst Quindell vigourously denied the accusations and produced research to counter the claims, much of the corporate mud stuck. Now, we have the news in the press that a major new joint venture with RAC has run into problems before it got going. The base of the plan was to place telematic devices in cars, but part of the value for RAC was the right to exercise warrants to buy shares in Quindell in the future. However, after the damage to the share price post Gotham City, the subscription price of 750p is way above the current price of around 200p (and falling today) and RAC seems to be unhappy. Even if the deal does go ahead, it will be another cash consumptive start up for Quindell. This only adds further grist to the critics who say follow the modest cash pile rather than the burgeoning top line. A stock that I would avoid until some of the dust storm settles.

These comments are not a personal recommendation to deal. Any investments can fall as well as rise in value, so you could get back less than you invest. I may have a financial interest in some of the stocks written about.