Every Foolish investor dreams of loading up on cheap shares in a troubled company just before the recovery kicks in. It’s how fortunes are made.
Right now, AIM-Listed insurance outsourcer Quindell PLC (LSE: QPP) is that company.
Its share price hit a 52-week high of 682p last July, only to crash to below 40p by the end of 2014.
Short sellers were circling, founder Rob Terry had left under a cloud, and PwC had been called in to investigate the company’s accounts.
It was a desperate time, and in retrospect, the perfect time to invest. One month later its shares have leapt more than 200% to 122p.
If you screwed up your courage to buy Quindell at the right time, I offer my congratulations. The question is, what happens next?
Quindell is winning again, but it remains addicted to controversy.
The recent appointment of Richard Rose as non-executive chairman and Jim Sutcliffe as deputy chairman proved unnecessarily troublesome, due to their controversial share option packages.
A Troubled Shared
The Financial Reporting Council (FRC) Corporate Government Code recommends that non-executive directors shouldn’t receive share options or other performance-related payments.
Incredibly, the chairman of the FRC’s Codes And Standards Committee is… Jim Sutcliffe.
Or rather he was, as he subsequently resigned from the FRC board.
More murky share dealings were the last thing Quindell needed, given that Rob Terry was forced out after it emerged that he had bought company shares by taking out loans against his existing stakes.
Tosca And Soros
Investors are taking a bet that Sutcliffe’s short-term appointment is part of a determined attempt to force a rapid turnaround at the company.
They were already buoyed by news earlier this month that hedge fund Toscafund Asset Management had invested £16.1 million in the company, taking a 5.4% stake.
The price has been driven up again in recent days by rumours that billionaire investor George Soros had been buying Quindell shares.
Roll The Dice
Despite that 200% leap, Quindell is still far below its 52-week high, which may tempt some investors to dive in hoping for further upside.
The gamble may pay off, but any investment in this company is just that, a gamble, until PwC files its report on the company’s accounting practices and cash generation prospects at the end of February.
Until then, Quindell will continue to be mired in uncertainty. Questionable director pay practices, so soon after Rob Terry’s exit, are hardly designed to boost frazzled investor confidence.