Class Action Lawsuit Set To Hit Quindell PLC

Troubles have piled upon troubles for Quindell (LSE: QPP), the embattled insurance outsourcer whose shares have crashed 95% this year. The AIM-listed company, which once had grand ambitions to join the FTSE 100, now looks set to face a class action lawsuit.

This follows the resignation last month of Quindell’s founder and chairman Rob Terry, and a recent announcement from stand-in chairman David Currie that the company has missed its cash flow targets, that management’s plans are reliant on continuing access to three overdraft facilities, and that, “in conjunction and consultation with the Company’s bankers, advisers and auditors”, PwC has been engaged to carry out an independent review of the business.

Now, Your Legal Friend, one of the UK’s leading litigation firms, is looking to bring a class action on behalf of shareholders against Quindell and its Board to recover compensation for their losses.

The law firm cites four grounds in particular for the action:

  • Published financial results and forecast statements which most commentators confidently expect will in the near future be very materially restated.
  • Confirmation of progress towards a main market listing followed 2 days later by an announcement that this had been rejected.
  • Announcement of significant share purchases by directors followed by a correcting announcement 3 days later which indicated that the substance of these transactions was in fact director share sales.
  • These share sales were made in a period after one of the company’s joint brokers had resigned but before that material fact had been announced to the market, prompting the London Stock Exchange to launch an investigation.

Colin Gibson, chief operating officer at Your Legal Friend, also points out that Rob Terry has been disposing of his substantial shareholding at prices substantially below those he claimed only a few weeks ago represented a three- or four-fold undervaluation of the company.

Mr Gibson further tells me that his firm is investigating the propriety of a number of acquisitions and other transactions in which Quindell has been involved during the period 2011 to 2014, including “the £150m Himex acquisition”.

Whether the class action gets off the ground remains to be seen, but there’s a certain irony in the fact that Quindell, whose core business revolves around personal injury compensation claims of the ambulance-chasing variety, could now itself be on the receiving end of the same kind of claims.

Your Legal Friend has been first out of the traps in the race for aggrieved Quindell shareholders, but industry insiders tell me other law firms, who compete with Quindell in areas of their business, could also be relishing the prospect of joining the party once the results of the PwC review are announced.

However you look at it, Quindell has been an absolute disaster for investors. Avoiding big losers is just as important as backing big winners if you're aiming to retire seriously rich.

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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.