Fall triggered by Gotham City report failed to quell short-sellers’ interest in insurance outsourcer, says report

Short sellers have increased their collective stake in insurance outsourcer Quindell despite its recent share price nosedive, according to the Financial Times.

The company’s stock plummeted 56% at one point during Tuesday’s trading after the release of a scathing report by little-known research firm Gotham City Research, which attacked the outsourcer’s business model and founder Rob Terry.

Quindell rejected the assertions made in the Gotham City research, calling them “highly defamatory” and “deliberately misrepresentative”.

The company’s share price has since recovered. It shares rose 12.6% in yesterday’s trading to close at 26.75p. However this is still down on the 39p it was trading at the day before Gotham City released its report.

Short sellers aim to capitalise on drops in companies’ share prices and usually sell their holdings after a big drop such as that suffered by Quindell on Tuesday.

However, the Financial Times, citing figures from financial data provider Markit, said the proportion of Quindell shares on loan to short sellers increased to 6.3% on Tuesday from 6.2% last week.

The rise suggests that short sellers believe the company is still overvalued despite its recent share price drop, the FT said.

Quindell plans to publish a detailed response to Gotham City’s allegations this week. It is also considering legal action against the research firm.