Much has happened in the last few days and weeks. The following reviews what’s happening and puts forward the scenario that Institutional Investors are possibly in the background pulling the strings?
Institutional Investors could be using their strength to influence what’s happening in the Quindell board room. The following are a few examples:
1. Board Members Resign
Rob Terry probably wouldn’t have resigned unless his arm had been twisted. As a result of the negative press and EFH deal did the institutions put pressure on the board to remove Rob Terry , Steve Scott and Lawrence Moorse?
Institutions are measured on their performance and would therefore want by year-end, when potential bonus targets need to be met, for the Quindell share price to rise significantly from the current level.
It could be they believed that Rob Terry needed to be removed to ensure leadership could be put in place that is not tarnished with legacy issues. This would also provide the opportunity to put in place a leadership team that is respected by the city.
2. Rob Terry Selling Shares
Was pressure put on Rob Terry by the institutions to sell a significant number of his shares?
If Rob Terry simply wanted to forget about Quindell and move on he would have sold all his shares rather than keep a 2.99% holding.
It’s possible Rob Terry was given a time frame to reduce his share holding to below the 3% reportable limit to distance RT from the business. Institutional Investors could have threatened to sell all of their holdings unless RT reduced his holding.
RT would hold his 2.99% stake only if he believed that at a later date he would get a better return.
3. Shorting of Shares
The Institutional Investors, like private investors, would want the shorting attack to stop as soon as possible. The institutions could facilitate this by encouraging Rob Terry to dump a large amount of shares on the market.
Obviously the share price then falls, providing shorters with the opportunity to buy large amounts of shares at rock bottom prices to close their positions.
The evidence is this is happening as:
a. Those informing the market of their positions are indicating a reduced position.
b. Large quantities of shares traded this week with no announcement regarding anybody reaching a level that requires the market to be informed. It would therefore be logical to come to the conclusion the shares have been returned to the lenders.
4. PwC Review
Have Institutional Investors requested this so we have an independent view of the business? This would help with market sentiment and also act as a marketing tool for anybody considering the role of Chairman?
The PwC review, assuming positive, will be an excellent sales brochure for any senior person contemplating joining the business.
This week hasn’t been pleasant for private investors. However when you take a step back and look at what’s happening, it is easy to come to the conclusion that the business has taken one step back to create a springboard to return value for its investors.
With the Rob Terry influence significantly reduced and the PwC review underway the concerns any possible investors might have about the company are being removed.
It is also worth noting David Currie used to have a leadership role with Investec for many years and will therefore have a significant number of network connections within Investec. Investec have over the last few weeks increased* their share holding in Quindell. It is unlikely they will have done this without speaking to David Currie. This potentially provides a good indication of what David Currie is saying about Quindell to his contacts.
This week provides the opportunity for the share price to start the long haul back, on the journey that ends with the share price reflecting the value of the business.
It wouldn’t be a surprise if more positive RNS’s are issued before Christmas.
* see comments in comments box below.