Listed legal services provider Quindell has said it is considering legal action against a US analyst after a scathing report triggered a 40% fall in its share price.
Gotham City Research called the AIM-quoted company a ‘country club built on quicksand’ and made a number of allegations about investments in Quindell in a 74-page dossier.
The investor’s comments prompted a sharp loss of the value of Quindell shares, which initially fell 56% to 17p from their opening price of 38.75p. The price recovered to 24p by the close of trading and today has risen to 26.5p.
In response, Quindell yesterday issued a statement saying it ‘considers the note to be highly defamatory, deliberately misrepresentative and entirely rejects the conclusions that are made’. It accused the analyst of deliberately ‘shorting’ its stock.
It added: ‘A more detailed response shall be announced before the end of this week. In the meantime the company is also consulting its legal advisers on what immediate action can be taken against Gotham City Research LLC and is reporting coordinated shorting activity to the appropriate authorities.’
In the company’s annual results for the year to 31 December 2013, released on 31 March, Quindell reported pre-tax profit of £107m on turnover of £380.1m. Since that time, the company has released a 2014 Q1 trading statement, which showed gross sales for the group of £162.9m.
The statement added: ‘The board remains confident of meeting or exceeding market expectations in all key performance indicators in 2014 and all other initiatives being pursued remain on track.’
A Twitter account purporting to be from Gotham City Research has said it finds Quindell’s response ‘defamatory’ to its own brand.
Quindell currently owns four legal services providers: Silverbeck Rymer, Pinto Potts, The Compensation Lawyers and Accident Advice Helpline.
It has also acquired a medical reporting company, a repair business, costs firm Compass Costs and software company iSaaS Technology Ltd, and offers accident management services to all UK Honda customers.
IT analyst Anthony Miller of the UK firm TechMarketView said that the 2013 results support Quindell's claims.
‘Of course, this assumes that the numbers are true in the first place, and on this point I am in absolutely no position nor qualified to comment. Gotham City evidently believes it is.'