Quindell broker Cenkos moves quickly after shares fall following investor confusion over share buy transaction
Quindell’s house broker Cenkos fired off a note today clearing up the confusion around three board directors snapping up around £2m in shares in a deal with a relatively unknown Indianapolis-based investment firm.
Having initially risen 6%, the stock then tanked 9% yesterday as investors digested details that chairman Rob Terry, along with finance head Laurence Moorse and non-executive director Steve Scott, purchased 1.575m shares worth around £2m.
To fund the deal, the trio entered into an arrangement with Equities First Holdings LLC. The deal sees the Quindell trio hand over shares as security, and in return, they receive a loan from Equities First Holdings LLC.
Money from the loan can then be used to buy more Quindell shares.
At the end of the two-year arrangement, the Quindell trio will redeem the loan. Depending on whether the share price increases or decreases, they stand to make a tidy profit or loss.
Cenkos stressed that the trio are not using the arrangement to ‘cash out’ the stock.
- The directors have only currently transferred a percentage of their total holding as security (i.e. proportionate to the purchases),
- The executive directors are only using the loan to buy equity,
- The balance of the 52m shares could provide further firepower for share purchases or additional margin security if required,
- EFH cannot sell any stock unless the directors default.
Quindell, which has been the target of short-sellers following a note in April from Gotham City that the business had suspect profits, enjoyed a 1.2% rise in share price this morning.