Pre 8 a.m. comments

The plot thickens at Quindell Portfolio (LON:QPP). Regulars will know that I've been sceptical about this company for some time, and it looks like my instincts are correct, in that a number of issues have emerged which should give shareholders considerable cause for concern. I am not a shareholder, nor do I have a short position in it either. So my interest is purely in understanding the facts, and communicating them to readers here.

Recently published accounts from Quindell showed Debtors ballooning to over £200m. This is on an annualised turnover run-rate of "more than £300m", so that's clearly a worryingly high level of debtors. Bear in mind that both Accident Exchange and Helphire unravelled because they published huge profits for several years, whilst debtors rose & rose, until in the end the whole thing collapsed because they could not collect in those debtors. So given that Quindell operates in the same space (although arguably has a different business model), ballooning debtors is bound to cause concern.

However, a number of other items in the accounts caused me concern, and I sent a (sort of) open letter to Quindell's CEO yesterday, via Twitter (since that seems to be his main method of communicating with shareholders) and a post on advfn. Click here to read that post (no. 5628).

I've not had a reply from the company yet, but shortly afterwards some of my questions were answered through an article in today's Financial Times which is pretty alarming, and certainly calls into question the ethics of the way Quindell is run.

The £13.3m derivatives contract which I queried with the company turns out to be a swap contract which the company used to guarantee that a new investor who subscribed for £17m of new shares in a Placing would not suffer any losses! The Placing was used to finance one of their acquisitions. Now clearly that is wrong, because it is prejudicing the interests of other shareholders in order to provide an artificial share price guarantee to a new shareholder.

As the share price has dropped 40% in recent days, then that will have landed Quindell with a cost of several million. I think the shares are likely to tank again today, as it's becoming pretty obvious that the short sellers who are attacking the company…

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