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Quindell PLC Directors Are Selling Shares!

Ever since chairman Rob Terry and his fellow Quindell (LSE: QPP) directors claimed they were buying new shares last week, the investment world has been abuzz with talk of the true nature of the deal.

The big puzzle was why the three of them — Terry, finance director Laurence Moorse and non-executive Steve Scott — would apparently be borrowing the cash to pay for them from Indianapolis-based “pioneer in stock loans” Equities First Holdings (EFH). And exactly what were the terms of the arrangement?

Who’s selling shares?

You see, Equities First has a track record of buying shares like this and then selling them on the open market. And that made more than a few investors rather nervous.

And in the days after the “purchase” was announced, daily trading volumes of Quindell shares soared — from between 3 and 6 million shares per day prior, on Wednesday 5 November 15.4 million changed hands, 8.4 million the next day, and 11.5 million on Friday.

While that was happening, the share price was tanking, and crashed to a new 52-week low of 115p on Friday — there’s been a big seller of shares out there!

The truth

Today the price has slumped further, and is down to 102p as I write, having hit yet another new low of 88.7p during the morning. Quindell shares have now lost a massive 85% since their year-high of 682.5p back in April.

So what’s happened? We’ve had a clarification from Quindell, that’s what. It turns out that the EFH deal was indeed a sale and repurchase agreement, and our three heroes have sold millions of shares between them.

Rob Terry has SOLD 8.85 million shares in order to buy 1 million.

Laurence Moorse has SOLD 200,000 shares in order to buy 50,000.

Steve Scott has SOLD 1.35 million shares in order to buy 700,000.

And they can sell them

Quindell also admitted that “As the legal and beneficial holder of the transferred shares, EFH may take any action it deems appropriate in relation to the transferred shares and is under no obligation to hold or retain the transferred shares“.

Rob Terry says he is relying upon assurances that EFH will not sell the shares outright. But someone has been selling, and selling big — and I personally would not base any of my investment decisions on anything Rob Terry says he has been assured of.

If, like Rob Terry, you'd just sold a net 7.85 million Quindell shares, where should you think about putting the money?

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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.