A story I heard at the weekend that Rob Terry, founder and executive chairman of beleaguered insurance multitasker Quindell (LSE: QPP), had cleared his desk on Friday has turned out to be true. The Hampshire-based company this morning confirmed its controversial boss has resigned from the board of directors with immediate effect. Two of Mr Terry’s long-time trusted associates, finance director Laurence Moorse and non-executive director Steve Scott, are also standing down.
The company said Mr Terry will be retained on a consultancy basis in order to ensure an orderly transition and that Mr Moorse will step down from the board after firm’s 2015 AGM, but remain with the company for up to 12 months in order to effect an orderly handover.
Director David Currie, who has become Quindell’s non-executive interim chairman, commented:
“Rob is the founder of the business and has made a huge contribution to Quindell’s growth to date and the Board thanks him for that. We look forward to completing our search for a new Chairman and additional non-executive directors as soon as possible”.
The company further commented that: “The Board remains confident in the future prospects of the business”.
Mr Terry brought Quindell to the AIM market in 2011, and embarked on an extravagant acquisition spree, largely funded by issuing shares. His vision to shake up the insurance industry with a “game-changing” business model captured the imagination of plenty of investors. Indeed, by February this year, Quindell’s shares were trading at 660p, valuing the company at £2.7bn.
However, the shares soon went into freefall: there was a searing attack on Quindell by US bear analysts Gotham City in April, the company’s application to move from AIM to London’s Main Market was rejected by the UK Listing Authority in June, and a joint venture with the RAC collapsed in September. The shares closed yesterday at just 55.5p, giving Quindell a market value of less than £250m.
Market doubts about the sustainability of Quindell’s business model and the company’s ability to translate paper profits into hard cash have been a long-running story. However, negative sentiment escalated over the last 10 days with news that Messrs Terry, Moorse and Scott had sold shares in Quindell, that the company’s biggest institutional backer, Fidelity, had also slashed its shareholding, and that Quindell’s joint broker and adviser, Canaccord, had quit.
The share dealings by the directors appear to have been behind today’s announcement, with Mr Terry commenting:
“I entered into the share transactions announced on 5 November 2014, with the best of intentions for the Company and all shareholders and it would have been my intention to acquire more shares were it not for the restrictions due to the discussions leading to this announcement. I am clearly disappointed and sorry that events turned out as they did.
“In view of the share price performance of the last few days, it is likely that a margin call will be made in relation to the share transactions and, at the current share price, I would expect to relinquish my rights to acquire 8,850,000 shares under the EFH Sale and Repurchase Agreement, rather than satisfying the margin call as this would now no longer make economic sense. This will draw a line under this Agreement and I have no intention of making further use of this Agreement or its like again”.
For AIM market veterans, there is a sense of déjà vu: a highly acquisitive strategy, a share price that sky-rocketed then collapsed, and peculiar share dealings before director departures were all features of Mr Terry’s previous stock market venture Innovation Group.
Mr Terry — who will be remembered for his less-than-transparent communications and a preoccupation with Quindell’s share price — may be moving out of the spotlight, but clouds still hang over the company.
Indeed, an article in last weekend’s Sunday Times, implied that Quindell is on the verge of a cash crunch, and has been seeking an outside injection of funds: “The company is believed to have met at least two hedge funds in recent weeks to discuss raising money against expected future income. It is understood Quindell went to the funds after failing to interest banks in a deal”.
The Sunday Times quoted a Quindell spokesperson as saying: “The company has no current need for any third-party financing”. The inclusion of that word “current” in the statement sounds ominous to me.
