Quindell - deserting a sinking ship, slowly

It's all change at Quindell. A day after joint broker Canaccord threw in the towel, the stricken insurance outsourcer's founder, finance director and non-executive director are all heading for the exit. One of its long-suffering PR companies - Redleaf - has resigned too, and the shares remain highly volatile.

Rob Terry, the man who started Quindell a decade ago, has stood down with immediate effect, but will hang around as a consultant. Curiously, he'll be on hand to "assist the board, where appropriate, in executing its strategy." Is that a good thing?

Chief number cruncher Laurence Moorse will leave after next year's AGM , probably in June. But it could be a further 12 months before he finally hands in his pass "to effect an orderly handover," although we'd be surprised if it's that long. And finally, non-exec Steve Scott is off straight away.

All three were involved in the complicated share deal finance scheme put together last month, and had come under fire in recent days for effectively selling over 10 million Quindell shares. They were using the cash raised to buy back Quindell shares at today's far lower prices, but were forced to issue a further statement explaining the convoluted procedure.

And, as we pointed out yesterday, the shares are deep in margin call territory, which means the trio will either have to sell more shares to EFH, or hand over cash. Well, Terry has made up his mind. He's out.

"In view of the share price performance of the last few days, it is likely that a margin call will be made in relation to the share transactions and, at the current share price, I would expect to relinquish my rights to acquire 8,850,000 shares under the EFH (Equity First Holdings) Sale and Repurchase Agreement, rather than satisfying the margin call as this would now no longer make economic sense," he said Tuesday. "This will draw a line under this Agreement and I have no intention of making further use of this Agreement or its like again.

"I entered into the share transactions announced on 5 November 2014, with the best of intentions for the company and all shareholders and it would have been my intention to acquire more shares were it not for the restrictions due to the discussions leading to this announcement. I am clearly disappointed and sorry that events turned out as they did."

David Currie, who used to run the investment banking division at Investec, is left steering the ship just four months after joining as a non-executive director. As non-executive interim chairman, he’ll be keen to get replacements in as quick as possible.

But is new blood the answer? Well, certainly Terry's position had become untenable. The City had clearly lost all confidence in his ability to run the business following a series of disastrous decisions, culminating in the ill-conceived share deal loans. Quindell has become a short-sellers' favourite play and the shares are currently sitting at 56p, not far off a three-year low. They’re down 91% since April and 53% in the past 10 days.

Will Quindell, with all the negative publicity and corporate stigma, be able to attract the right people for the jobs? This is a business with few fans, and it's not just management investors are unhappy with. Quindell's revenue model has come in for heavy criticism, too - it recognises the revenue in its accounts way before it receives payment for the job - and it could need more cash to tide it over until that money comes in. A fresh face cannot change that.

"It could be a while before we see an appointment," a source told Interactive Investor. "They could lie low for a little bit."

It's also worth remembering the EFH stake. Despite daily trading volumes topping three million, this still creates something of a stock overhang. Of course, they're not a forced seller, and we don't know what their plans are. They could drip the shares in, or carry out a bulk placing at a discount to the market price. It's another unknown to add to the list.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.