Controversial insurance-sector hydra Quindell (LSE: QPP) has been under the cosh ever since it was slated as a country club built on sand by US bear analysts Gotham City Research back in April.
Quindells subsequent failure to gain a Main Market listing and the collapse of a joint venture with the RAC have been additional setbacks, but reams of other ostensibly positive newsflow have failed to arrest a persistent decline in the shares.
Super-confident company trading updates havent helped.
Bullish broker notes with target prices for the shares of up to 10 havent helped.
A legal judgement against Gotham City hasnt helped.
Initiation of legal action against blogger Tom Winnifrith for suggesting that the Company and certain Board members have effectively committed fraud hasnt helped.
Long-suffering investors have seen their shares in a long decline from a high of 656p to just 80p, as I write. The forward P/E is a mere 1.
In the face of the relentless erosion of the value of their investment, I know many continuing shareholders have been hanging on in there on the basis of continued share buying by Quindell directors, and continuing support for the company by a number of institutional investors. However, things have been thrown into turmoil on these fronts in the last four days.
Having announced last week that founder and chairman Rob Terry, finance director Laurence Moorse and non-executive director Steve Scott had further increased their stake in the company, by means of a loan facility that involved the directors using existing shares as security, Quindell was obliged to admit on Monday that Terry, Moorse and Scott had actually been net sellers. Terry, for example, far from increasing his holding from 10.46% to 10.69% had actually reduced his stake to 8.66%.
Actions speak louder than words, and investor bulletin boards were soon rife with the question of just how much belief these directors have in the company. The shares dived 20% on the day, and a further 20% yesterday.
Today, the other big plank of private shareholder optimism the continuing support of institutional investors is creaking loudly, following an announcement that top institutional backer Fidelity has slashed its stake in Quindell.
Fidelity had demonstrated its support for Quindell after the Gotham City report by cranking up its shareholding to 41,246,516 shares (10% of the company). Fidelity continued to hold that number of shares at 6 November (still showing on Quindells corporate website, as I write). However, todays announcement reveals that by yesterday Fidelity had sold its stake down to 21,398,267 shares (4.9%) and Quindells share price is now under the cosh once again.
Will Fidelity bail completely, and other institutional investors follow suit? No one knows, apart from the institutions concerned. As things stand, though, all the risk looks on the downside to me.
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G A Chester 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.