Is Quindell Plc Playing With A Straight Bat?

Shareholders in Quindell (LSE: QPP) have been on a roller-coaster in the last 12 months, with the shares tanking by around 82% — that’s a serious loss to take on the chin.  The story seems to have changed in the last week, with the shares surging by almost 29%.  What’s behind the rise?

The story so far…

On 2 January 2015, the company released an update to the market: “In addition to cash generation initiatives that will continue into 2015, the Group is in early discussions with a range of parties interested in exploring possible transactions with the Group relating to a number of its operating businesses.”

Over the next 10 days, the shares more than doubled.  On top of that, Richard Rose was appointed as chairman and it seemed that things may be turning around for the company.

Then, on 22 January, Quindell announced it had entered into exclusivity arrangements in respect of the possible disposal of an operating division of the Group: “The Company notes the speculation concerning the identity of the third party and can confirm that Slater & Gordon Limited (“S&G”) is the party referred to in previous announcements.”

This was confirmed in a release to the Australian stock exchange by Slater and Gordon on 23 January: “SGH Confirms that it has entered into and exclusivity agreement with Quindell regarding a possible disposal of an operating division of the group.”

Then, on 23 February, a further RNS was released by Quindell: “Further to its announcement of 22 January 2015, Quindell Plc (AIM: QPP.L) notes the further press speculation and announces that it has extended Slater & Gordon Limited’s (“SGH”) exclusivity period relating to the possible disposal of the professional services division (“PSD”) of the Group to 31 March 2015… Discussions are progressing with SGH and the indicative terms being discussed would imply a significant premium to the Company’s market capitalisation at the close of trading on 20 February 2015.”

After this release, the shares understandably surged 25% on the day, having drifted lower during most of February.  The following day, this was released by Slater and Gordon: “Slater and Gordon Ltd notes the announcement made by Quindell Plc on 23rd February 2015.

“SGH confirms that discussions and due diligence are ongoing and exclusivity has been extended until 31st March 2015.  No offer has yet been put to Quindell and there is no certainty that an offer will be put that is attractive to Quindell, or that an offer will eventuate.

“As previously disclosed, SGH is also completing due diligence on a portfolio of Quindell personal injury litigation case files with rights to take a transfer of files over the coming months.  This process is continuing.”

I have to admit, I found this rather strange — as it seems to contradict the statement released by Quindell.

What’s my take?

For me, there is simply not enough clarity here for me to invest my hard-earned cash.  I don’t like contradictory statements from two companies sat at the same table.  In addition, I would be surprised if any deal is done prior to the publication of the report from auditors PricewaterhouseCoopers.  Now, this may show that the bears have been wrong and, if this is the case, the shares could fly.  If not… well, I think things will get rather messy. As such, it’s not for me.