Yesterdays revelation that the directors of insurance-to-solar-panels jack-of-all-trades Quindell (LSE: QPP) have actually been net sellers of the companys shares, not buyers as theyd claimed last week, came as a big shock to many and the share price tanked as a result.
Today the fallout continues, as the shares hit yet another 52-week low in morning trading, of 88.25p. As I write, the shares are at 88.4p, down from yesterdays close of 95p and down 87% since their high of 682.5p. And trading volumes are accelerating, with 25.4 million shares changing hands yesterday.
We were further shocked by the revelation that the original RNS on 5 November, headed Director Share Purchases, contained claims that simply were not true and the correction published yesterday left out some crucial information.
On 5th, Quindell claimed that after the loan-funded transactions, chairman Rob Terry owned 46,650,000 ordinary Quindell shares, a million more than previously announced, finance director Laurence Moorse owned 1,246,666 and non-executive Steve Scott owned 5,637,992.
Those figures were false.
The millions of shares we now know they had sold to Equity First Holdings had been completely omitted from the calculation.
Coming clean, almost
They finally admitted on the 10th of November that they had actually sold the shares, at an effective discount of 36% to the market price! Now, theres an obvious question there why would a company director who genuinely thought his shares were undervalued sell them off so cheaply?
Perhaps the answer lies in their contractual obligation to buy them back in two years time at only a little more than the sale price, as explained in the latest RNS? Well, heres where theres another bit of key information omitted. The agreement is a non-recourse one, which means they actually have no legal obligation to buy anything back at all they can just walk away at any time they please. They have simply sold their shares, with no actual strings attached.
There are obvious questions here about how a company can get away with publishing RNS notices that contain untrue statements and which omit crucial information information that shareholders have a right to know.
What about regulations?
Quindells nominated advisor, Cenkos, surely has some questions to answer, too. Did itknow on 5 November that Quindell directors had actually sold millions of shares? I presume they didnt, as I really couldnt see their approving such an RNS otherwise. But if they didnt know, how come they didnt make sure they had the full details of the deal?
Surely there are regulations that cover all this, you may ask, but thats the murky world of AIM for you. Im starting to understand why the LSE refused to admit Quindell to a full market listing now
If you’d prefer somewhere a bit safer than Quindell to invest your cash, where should it go?
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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.