Listed legal services company Quindell has confirmed it has started legal action against an investor which it said caused a sudden fall in its share price.
Value in the company fell more than 50% at one point on the AIM stock exchange after a 74-page publication by Gotham City Research.
The share price started the week at 38.5p and dropped to 17p before recovering today to 23.75p.
In a statement published today on the stock exchange – the second by Quindell since the speculation started – the company said it had initiated legal action and reported the matter to the Financial Conduct Authority for what it called a ‘co-ordinated attack’.
The statement said: ‘The board continues to consider the publication earlier this week by Gotham City Research LLC (GCR) to be highly defamatory, deliberately misrepresentative and entirely rejects the conclusions that are made.
‘The board notes the short positions that were taken in the company’s shares prior to the publication by GCR and also the reference in the GCR report admitting to readers that they should “assume that, as of the publication date of the report, Gotham City Research LLC stands to profit in the event the issuer’s stock declines”.’
Gotham City Research has yet to comment since the publication of its report, in which it questioned the sudden increase in profits quoted by Quindell.
Its last post on Twitter, made on Tuesday, said: ‘We find Quindell’s response (unsurprisingly) lacking in details. We also find their response defamatory to the Gotham City Research brand.’
In Quindell’s annual results for the year to 31 December 2013, released on 31 March, the company 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.
Tony Bowers, senior independent director and vice chairman of Quindell said: 'I hope with this extensive response to the Gotham "research" that investors will be reassured as to the company's transparent approach to investor relations.
'It is the intention of a number of the directors to purchase shares in Quindell once they receive clearance from the appropriate regulatory bodies. I have personally taken the time to ensure that the level of detail of our response meets the needs of all of the investors, including those with whom we have personally spoken.'
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.