Good morning!
Equities First Holdings
This is an American, apparently unregulated, finance company which has been doing deals with UK listed company Directors, to provide "loans" against Director shareholdings in their companies. However, a little digging online shows that EFH's modus operandi is clearly to sell the shares that are transferred to them as collateral, and that the "loan" is non-recourse - i.e. that the borrower can just walk away from it, with no penalty.
Directors at five companies appear to have used this facility - one is Quindell (which I can now mention, as I am no longer short of it, as of this morning), IQE, IGas, CloudBuy, and Angle.
It appears that the loan facilities could be used as a backdoor way of Directors selling shares, in a way which avoided having to disclose that to the market, or so they thought. It could even be used to disguise selling of shares, and make it look as if the Director is buying shares (if some new shares were simultaneously bought with the "loan" proceeds).
The whole thing has unraveled, and three of the five companies concerned have been forced to issue clarification or correction statements. It's possible that some of the Directors involved did not realise the consequences of using this arrangement, but it has reflected badly on all of them.
Shares in Quindell (LON:QPP) have been in freefall, and I expect to see the departure of the founder within days, in similar circumstances to which he was ejected from his previous listed company Innovation (LON:TIG). Good riddance quite frankly. I'm afraid that type always come unstuck eventually.
Shares in Cloudbuy (LON:CBUY) (statement today) and Angle (LON:AGL) (statement today) are also down sharply today. Although in both these cases it looks as if the Directors concerned were probably genuine, in wanting funds for a house purchase, and were probably unaware that the modus operandi of EFH appears to be that they immediately dump the transferred shares in the market.
The FCA, or whoever it is that is supposed to be regulating London markets, needs to issue some immediate instructions on this subject. Although the hot water that the above companies have got themselves into will surely deter other Directors from going down this very…
