If a roller-coaster ride for your shares is bad for your blood pressure, you wouldn’t have wanted to hold Quindell (LSE: QPP) in recent weeks.
The firm, which offers software and consultancy to insurance and telecoms businesses, was hit by a short-selling attack back in April — after having soared to a price of 43p, the shares crashed to around half that and then slid some more.
And today Quindell is down even further, losing 20% to 14p — the price is now up only 80% over the past 12 months.
The reason? On the face of it, it seems rather puzzling.
It’s done too well
You see, Quindell has been seeking a move away from the Alternative Investment Market (AIM) and to a full London Stock Exchange listing. And we heard today that it has been refused, due to the company’s failure to satisfy Listing Rule 6.1.3.
And that’s because the company has been doing too well!
What?
Yes, specifically, Rule 6.1.3E (5) says that a company “may not be eligible if its business has undergone a significant change in its scale or operations during the period of the historical financial information, being the last three years’ audited accounts“.
Quindell has gone from turnover of just £150,000 in 2010, up to £13.7m in 2011, and on to £380m by 2013! And from a pre-tax loss of £100,000 in 2010, the firm recorded a profit of £107m last year.
Forecasts for the next two years look great too, with pre-tax profit of £323m pencilled in for 2014 followed by £488m for 2015.
Disappointment
Founder and executive chairman Rob Terry said “Regrettably it is Quindell’s success and change of scale of its operations during the last three years that is a core reason for the Group not being deemed to be eligible for a Premium Listing at this time. Quindell has significantly expanded its business into new areas of opportunity, which has resulted in a business employing over 4,000 people today globally and has organically created approaching 1,500 jobs in the UK making Quindell one of the largest employers in a number of areas of the country“.
And the firm isn’t allowed a full LSE listing!
Still, a lot of that growth has been through acquisition, and it makes some sense for a firm to be able to show a few years of organic progress before getting the LSE nod.
What should you do?
On top of the earlier crunch caused by a negative report from Gotham City Research (with Gotham City standing to profit in the event of a Quindell price fall!), shareholders will feel hard done by. But if you still think the company is a good one, now could be a great time to buy in.
