Quindell Plc: A Country Club Built On Quicksand

Transcript

Gotham City Research initiates coverage on Quindell PLC, with a price of 3p/share (92% downside) SUMMARY 42%-80% of Quindell’s profits are suspect, as we are unable to reconcile the whole with the sum of the parts. Quindell was little more than a country club until 2008/2009, yet QPP somehow began reporting Microsoft/Google-esque profit margins in 2010/2011. 26%-43% of Quindell’s 2009 and 2010 revenues came from Clickus4.com, a subsidiary owned by CEO Robert Terry. 41% of Quindell’s 2011 revenues came from an undisclosed related party (controlled by a QPP executive). 10+ acquisitions lack economic substance. Several of the acquired companies are little more than paper companies. QPP’s largest telematics customer is itself (via subsidiaries Himex & Ingenie), accounting for 61% of 2013 revenue. 99% & 80% of Himex’s 2012 and 2013 balance sheets are seriously deficient (Himex is QPP’s largest acquisition). Former executives allege Himex/Navseeker lied to them about its financial state and that in effect they were operating a Ponzi-style scheme. 2011-2013 accounts receivable are between 86%-231% of revenue, while deferred revenue only 1%-2% of revenue. Nearly all of CEO Terry’s £11 mm personal investment into Quiindell was used to build Quindell the country club. Quindell fails to explain how its personal injury business complies with Lord Jackson’s reforms & referral fee ban. The Chairman of the Transport Select Committee, Louise Ellman recently initiated a probe to determine whether ABSs are used to side-step the Jackson reforms. 3 auditors in 3 years, since 2011.