The cash came from the sale, back when the company was known as Quindell, of the bulk of its insurance business to Australia’s Slater & Gordon. The plan all along was to hand over most of it to shareholders – and, incidentally, the Slater & Gordon share price has crashed since it took on the Quindell business, so the acquisition hasn’t looked too successful so far.

Anyway, the only problem with the planned cash handover was that court approval was needed. With the spectre of a Serious Fraud Office investigation into the company’s accounting and practices under the leadership of disgraced ex-chairman Rob Terry, I didn’t see that as likely to happen.

But it has, and the firm can now go ahead with its intended payout of 90p per share, which should happen by the end of the month – so if you were a shareholder as of 18 December you’ll get a nice pocket filler.

Share consolidation

The shares were suspended on the day of the decision and have been readmitted to trading today, and you might be surprised to see the price apparently more than doubling to 166p. But there’s also been a share price consolidation, in which every 10 of the old shares have been replaced by one new share, meaning that the current share price represents 16.6p per old share.

And that fall in value reflects the cash handout. Existing shareholders have 16.6p per old share plus 90p on its way, totalling 106.6p, or roughly what they had last week. If you buy now, of course, you won’t get the 90p cash.

But what does it mean for the company going forward?

Well, for one thing, a legal claim by a group who lost money is going ahead. Acting on their behalf, law firm Your Legal Friend is seeking £9.4m, claiming its clients were misled by previous Quindell accounts filings – those accounts were restated in August, turning previously claimed profits into hefty losses. Should this claim succeed, there will almost certainly be others to follow. Your Legal Friend already has a second claim from others in the pipeline, saying it has so far been contacted by more than 1,100 investors concerning their investments in Quindell.

And we still don’t know what the SFO outcome will be – though my hunch is that it will not be along the lines of “everything was just fine and Terry is a lovely bloke who’s never done a thing wrong in his life“.

Anything left?

But even putting that aside, if you buy shares today, your 166p would get you a stake in a small handful of lossmaking companies. The main ones are telematics firms Himex and Ingenie that are both burning cash, and the similarly unprofitable PT Healthcare. And there’s no sign of how Watchstone is going to be making any profits from these lame dogs any time soon.

So to those who bought in and made a profit from the cash handout, I say well done! But looking at what’s left of the company, it’s still in bargepole territory for me.

The post Has Watchstone Group PLC Finally Put Quindell To Bed? appeared first on The Motley Fool UK.

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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.

A new start?

After a few truly horrible years, culminating in a Serious Fraud Office (SFO) investigation into its accounting practices and the actions of its directors, Quindell has done exactly the same and is now known as Watchstone Group (LSE: WTG). I can’t blame them for wanting to get away from that tainted name, and if a company under new management is genuinely making a clean start, it can be a good idea.

But is Quindell, sorry, I mean Watchstone, really out of the woods? No, it very much isn’t.

At the same General Meeting that approved the change of name, the company reiterated its intention to hand back the bulk of the cash it got from the sell-off of its Professional Services Division, which would provide shareholders with 90p per share up front, followed by a further 10p when it hopefully gets its hands on £50m that is currently in escrow.

The court will decide

But as Quindell pointed out, the return of capital is still subject to court approval, with the date of the court hearing set for Wednesday, 16 December. Because of the likely effect on the share price, whichever way the decision goes, trading in the shares will be suspended from that date until the market opens on Monday, 21 December.

So what is the court likely to decide? Well, it will only allow the firm to hand over all that cash if it believes it is retaining sufficient to enable it to meet its likely liabilities in the future. With the result of the SFO investigation not expected for some time, and with nobody yet having any idea what obligations it might put upon the company, I think it would be foolhardy to assume the handout is going to automatically get the nod.

On top of that law firm Your Legal Friend is pursuing action on behalf of one group of shareholders, with a second group waiting in the wings — and who knows how many more might come forward should the first group win their claim? So to Quindell/Watchstone shareholders, I’d suggest you don’t plan that big Christmas party from your windfall just yet.

Not with my bargepole

And if you’re thinking of buying the shares today, at 98p, think also about what kind of company you’d be left with if and after the cash pile is handed over. Essentially you’ll have two loss-making telematics subsidiaries, Ingenie and Himex, for which there are no visible signs of turnaround yet. And then there’s PT Healthcare, which is also making a loss.

I personally see no value in the new Watchstone apart from its current cash pile, and whether investors can get their hands on it is still very much uncertain — this is still definitely one I would avoid.

The post Goodbye Quindell PLC, Hello Watchstone Group plc appeared first on The Motley Fool UK.

More reading

• Up 11% today, could the Magnum Ice Cream share price be an overlooked bargain?
• As Endeavour Mining shares jump 7% on Q1 results, is this a way into the gold rush?
• £5,000 invested in this red hot FTSE 250 growth stock last month is now worth…
• Missed the ISA deadline? Ignoring the next one could mean throwing away a £5,150 annual second income opportunity!
• As Standard Chartered shares jump on impressive Q1, is this a FTSE 100 banking bargain?

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK owns shares in Google's Alphabet. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.