Quindell (LSE: QPP) shares opened sharply higher this morning, after the firm announced it had won a libel ruling against US-based Gotham City Research, which published a highly critical report on Quindell earlier this year.
The news will be a relief to Quindell’s management, following the recent abandonment of the firm’s much-hyped telematics joint venture with the RAC.
Investors should also be pleased — the firm’s share price has fallen by around 70% from its April peak, but were up by as much as 10% when markets opened this morning.
Gotham didn’t turn up
English defamation law relies on the defendant [Gotham] to prove the truth of their claims.
According to Quindell, Gotham, which is based in the US state of Delaware, did not acknowledge or defend this case. Gotham has not yet commented on the ruling, although this article was written before US markets opened.
However, Tony Bowers, Quindell’s vice chairman, said:
“Whilst it is disappointing that Gotham has not been prepared to submit itself to the scrutiny of the English Courts … it is pleasing to receive validation of our claim and success in this matter.”
Mr Bowers also promised that further actions of this type may follow, in order to protect Quindell’s reputation. The firm says that the evaluation of damages will begin at the end of November 2014.
Report still available
As I write, the Gotham report on Quindell — which triggered a 35% one-day fall in Quindell’s share price when it was published in April — is still available on Gotham’s website, despite today’s ruling.
Indeed, my (limited) understanding of US law is that a separate US court ruling may be required to enforce the English court ruling in the US.
In other words, the protection of US law may enable Gotham to ignore today’s High Court ruling, for the time being.
Nothing has changed
Personally, I believe that today’s ruling changes nothing.
The big question for Quindell investors remains the same: will the firm be able to successfully convert all of the expected income from its ongoing compensation claims into cash?
Brokers covering Quindell appear to be content: consensus forecasts for Quindell have inched up since the firm’s interim results last month, and currently suggest 2014 earnings of 55.6p per share, putting Quindell shares on a 2014 forecast P/E of just 3.2.