What’s going on with the share price?
We know that shorters will manipulate the share price to provide a suitable exit point to buy back the necessary shares to close their positions.
Logic would dictate that those short would want to significantly reduce their exposure before the completion of the Slater and Gordon deal to ring-fence any profits.
The share price is currently c£1.34, this is significantly below fair value when you consider;
Slater and Gordon deal valued at £640m+. This equates to £1.45p per share and with the Technology business making £50m profit, at a PE of 5 this equates to 56p per share. The share price should therefore be at least (1.45 + 56) £2.01p.
The share price is therefore undervalued by at least 67p.
What happens next?
1) Shorters are hoping private investors will sell.
Some will, but many are savy enough to realise that with Quindell having stated they will be returning £500m+ to shareholders they will receive £1+ per share if they hold. They will also still have shares in a technology business.
Shorters will find it hard to find private investors willing to sell their shares at the current sp level.
2) Institutional Investors need their shares back
If Institutional Investors intend to vote they will need to have any loaned shares returned.
Quindell have stated that one Institutional Investor with 29.16m shares is going to vote in favour of the resolution. This would be M&G as they have this number of shares. We therefore know if these shares have been loaned that at least 29m shares need to be returned before the 17th April.
3) Short Positions
Currently c2.72% of the shares are controlled by Roble SL. That’s 11.87m shares that need at some time to be purchased.
We therefore have three external forces that are going to impact on the share price.
Add to this news from Quindell regarding telematics etc (see here) and the share price will be closer to £2+ by the time the Slater and Gordon deal is concluded.
Private Investors just need to hold their nerve and not be swayed by any negative blogs or press articles and any manipulation of the sp will have been in vain.