Quindell share price drops 36% in two days

Quindell’s share price has dropped by 36% in the past two days’ trading after a clarification about top executives’ share dealings failed to calm investors.

The insurance outsourcer’s share price closed yesterday at 75.5p, down 36.2% on Friday’s closing price of 118.5p.

The share price fell by 19.8% to 95p in Monday’s trading, and a further 20.5% in yesterday’s trading to 75.5p.

Quindell announced on Wednesday 5 November that chairman Rob Terry, finance director Laurence Moorse and non-executive director Steve Scott had collectively bought 1.58 million shares in the company.

It said that to fund the share purchase, the directors had taken out a loan under which they transferred Quindell shares to the lender, US-based investment firm Equities First Holdings (EFH), as security.

Following investor confusion about whether EFH might sell the stock, house broker Cenkos issued a note stressing that the three Quindell directors were not using the loan agreement to cash out of Quindell stock.

On Monday, Quindell itself issued a clarification stating that the directors had collectively transferred 10.4 million shares to EFH in return for payment of £8.8m.

It further stated that as the legal and beneficial owner of the transferred shares, EFH is under no obligation to hold or retain the shares.

But Quindell added that despite EFH’s rights, “the custom and practice of EFH was that the shares transferred would not be disposed of outright, other than in a default event, and will be held by their custodians throughout the term of the agreement.”

It also said that EFH had agreed not to use the voting rights attached to the shares and will not engage in any short-selling activities with the transferred shares.

Quindell added that the directors continued to have an interest in the transferred shares because under the loan agreement, they have to buy the shares back from EFH after two years.

But the announcement failed to halt a sharp fall in Quindell’s share price.

Quindell’s share price has been falling since April this year, after short-selling company Gotham City issued a highly critical report about the company.