Quindell - Rumours and Their Logical Progressions

Good morning,

N.B. This is a speculative article until any RNS' have been released!


I'm very pleased with the Q3 results Quindell released yesterday morning! So pleased that I'm not going to bother discussing them, but instead focus on this piece of potential news or rumour (depending on what you want to believe):


http://www.cityam.com/1413248976/quindell-chairman-mulls-break-unlock-value


To quote the article: 


"Quindell has already been ap­proached with a £140m offer for part of its business that generates just four per cent of its profit, City A.M. understands."


Now, the term "City A.M. understands" possibly means that it was mentioned under the radar by the company or alternatively that they have a source somewhere within Quindell. This being said we cannot rule out falsehood - the source as we know so far is after all the media, who aren't generally known for telling the truth before telling a good story. 

In the event that this is true (and I suspect it may be, because I Tweeted the writer and got this reply), I would suggest that two points be tackled with this sudden cash inflow:


Oliver Smith ‏@OliverSmithEU  4m

4 minutes ago

.@ProAIMTrader I can’t. But the business division in question wouldn’t be of a dissimilar size to Quindell’s Connected Home unit

1. Perform some form of share buy-back

- If you split the £140m straight down the middle, Quindell would be able to buy back around 46.6 million shares at £1.50. This being said, I would imagine that as soon as this news was released they would end up paying a significant amount more per share, but it would still have the desired effect of scaring off those with short positions.


2. Fix the company's net cash position 

- Personally, I've never been a huge fan of this negative argument, because it seems to be used more in the way of a conspiracy theory that the company is actually run by a Bond villain rather than as an actual point against the company. 

- The company saw the cash-flow problem and they're fixing it - end of.

- My point here would be that the remaining £70m could just remain sat in the bank or used to pay off any overdrafts and debt. This being said, with money being so cheep at the moment the market would probably appreciate it being sat within a bank account for a while before debt begins to be paid off.

I think that what shareholders need now, is some form of official announcement either way regarding this rumour, even if it's not an acceptance of the deal, as this would provide a partial third party valuation, which I feel would help to inspire confidence in the company and in Mr Terry. All the above is my opinion - make of it what you will,


The Masked AIM Trader


P.S. This has been presented to the company as a potential idea.