Confusion surrounding the convoluted share dealings of three of Quindell’s largest individual shareholders caused havoc for the price of the insurance outsourcer.
Last Wednesday, Quindell said its chairman, finance chief and a non-executive director had entered into a loan facility to borrow £8.76m, secured against their own shares, in order to fund the purchase of £2.2m more Quindell stock.
The move led to confusion over the weekend about the terms of the loan had been made. Quindell yesterday issued a statement to clarify the transaction.
“As previously stated and as demonstrated by the initial purchases made by the purchasing directors and the fact that the majority of the board has acquired shares recently, we believe the current market valuation of the company is materially below its true value,” chairman Rob Terry said yesterday.
The three directors have agreed to buy back shares transferred to EFH in two years’ time “at a price equal to 69pc of the three-day average market value per share applicable at the date of entering into the facility, less margin calls paid”. The firm is required to deliver the transferred shares or equivalent shares to each purchasing director on payment".
Quindell’s shares plummeted 19.83 per cent to close at 95p.
DIRECTOR’S SHARE DEALINGS EXPLAINED
Quindell’s chairman Rob Terry controlled 45.65m shares in the company, around 10.5 per cent, prior to the two-year “sale and repurchase agreement” announced last week. Terry then transferred 8.85m shares over to Equities First Holdings, a securities based lender, and received £7.47m in return – an average price of just 84.5p, a nearly 30 per cent discount to Quindell’s share price last week. He used the funds generated to buy another 1m shares in Quindell at market price, giving him a total interest of around 46.65m shares in the company.
While yesterday’s statement makes it clear that “EFH… is under no obligation to hold or retain the transferred shares,” Terry said “each of us purchasing directors relied upon assurances from EFH that… the shares transferred would not be disposed of outright.” Similarly Quindell’s finance chief Laurence Moorse sold 200,000 shares to EFH for £168,714 and reinvested £62,000 in stock, and non-executive director Steve Scott sold 5.11m shares for £1.1m and reinvested £873,000 in Quindell stock.
If Quindell’s stock falls more than 20 per cent below the value at which they were transferred to EFH, around 68p, then the three directors will be liable to put up additional stock or cash as collateral on the loans.