Is Time Running Out For Quindell PLC?

While it is often said that investors are very impatient and only stick with companies for a matter of weeks rather than years, when it comes to Quindell (LSE: QPP) it has been an entirely different story. In fact, it has been extremely interesting to see just how patient investors have been with a company that continues to offer such a vast amount of uncertainty regarding its future.

Multiple Challenges

For example, shares in Quindell have risen by a whopping 120% since the turn of the year despite the reputation of the company taking a couple of major body blows in recent months. Firstly, there was the poor communication from the company regarding the previous management team undertaking what effectively turned out to be sale and repurchase agreements. Certainly, the individuals involved soon left Quindell but, following a share price collapse, investor sentiment has picked up strongly.

In addition, the recent appointment of new board members caused controversy when it was discovered that their remuneration packages did not meet the UK Corporate Governance Code. While meeting the Code is not a requirement, it was perhaps disappointing for investors to see that Quindell had failed to comply with it after the challenges that had been presented by the aforementioned sale and repurchase agreement.

And, what made it all the more challenging for investors was that one of the individuals appointed by Quindell to take a place on its board, Jim Sutcliffe, was the Chairman of the Codes and Standard Committee for the Financial Reporting Council until he stepped down following his appointment at Quindell.

Meanwhile, the results of the independent investigation by PwC into Quindell’s accounting practices and cash flow situation has now been delayed. While it was supposed to be released at the end of February, Quindell now expects it to be released in the next few weeks, with it still also in talks regarding the potential sale of its Professional Services division and mulling over a possible restructuring of the business that could see several non-core assets sold off.

Looking Ahead

Clearly, investors in Quindell are still hopeful that the company can turn things around and, while that is a possibility, it has been very surprising that market sentiment has remained so robust in the meantime. After all, Quindell is awaiting an independent report that could severely damage its reputation (or show that its accounting practices are robust), is considering a restructuring, is in discussions to sell a major part of its business, and has been widely criticised by commentators regarding its corporate governance practices.

So, while investors in Quindell have been patient, it is clear that this could quickly run out unless positive news flow begins to emerge from the company. Whether this will happen or not is very much a ‘known unknown’ and, as such, it seems prudent to keep an eye on Quindell but to avoid buying a slice of it at the present time.

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Peter Stephens 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.