These are challenging times for investors in Quindell (LSE: QPP), with the professional services company having a number of key events to come that are likely to have a major impact on its future. Of course, the company’s shareholders have been remarkably patient, with Quindell’s shares rising significantly since the turn of the year and being up 43% in the last month alone. Realistically, though, is that patience misplaced and, looking ahead, can Quindell even survive another nine months?
Bid Talks
There has been mounting speculation regarding a possible bid for Quindell’s main operating division, professional services, which deals with claims made for things such as noise induced hearing loss. In fact, Quindell recently commented on press speculation regarding a potential offer from Australian Law firm, Slater & Gordon. And, while a figure of £640m plus a cut of future claims receipts from noise-induced hearing loss cases has been mooted, no firm offer has yet been made. Furthermore, as Quindell has stated, there is no certainty that an offer will be made, with talks still ongoing.
Independent Review
Of course, a key reason why a bid has not yet been forthcoming is the delay to the release of an independent review into Quindell’s accounting practices by PwC. It had been due for release in February but a new release date is yet to be confirmed by Quindell. As such, it is very likely that a bid from Slater & Gordon (or anyone else) will only come after a clean bill of health for the company and its accounting practices.
If the review does find that there are accounting irregularities then it could lead to a collapse in Quindell’s share price. In fact, it would be difficult to envisage Quindell continuing in its current form if its reported financials have proven to be inaccurate. Clearly, a clean bill of health is equally possible and, in this case, it appears as though a bid is likely, since Quindell’s prospective new management team has specifically stated that it is looking to refocus and rationalise the business, with it being open to offers for the professional services division.
As such, it seems probable that Quindell will, over the medium term, seek to focus on its technology division, since it appears to be comfortable with the idea of selling off its professional services division at the present time.
Looking Ahead
Quindell’s future is largely dependent upon the outcome of the independent review into its accounting policies. If it is positive then it appears likely that Quindell will continue to operate, but in a different guise than it has been doing in the past. However, if it finds issues with the company’s accounting policies then Quindell’s share price is likely to come under severe pressure, which could put its future as a business in considerable doubt.