After it turned out that Quindell PLC (LON:QPP) (OTCMKTS:QUPPF) founder and former chairman Rob Terry had been more or less shorting his own company (and subsequently got downgraded from chairman to consultant), bad news was almost inevitable as we head toward year’s end, and today’s announcement certainly qualifies.

“The growth in cash receipts in the final quarter of the year has not been as significant as previously anticipated,”Quindell PLC (LON:QPP) (OTCMKTS:QUPPF) wrote on its corporate website.

Quindell Plc QPP
Quindell Plc QPP

Poor cash flow is a huge blow to Quindell’s business claims

If you haven’t been following the Quindell PLC (LON:QPP) (OTCMKTS:QUPPF) story that might not seem significant, but the company’s soaring revenue and meager cash flows has been a source of worry for investors for most of the last year. As it became clear that Quindell was aggressively recognizing revenue from lawsuits that might take years to finish (and which aren’t guaranteed to pay off), investors have been demanding to see actual cash on the books by the end of this year. To see how important the issue has been, at one point just the mention that the company would be able to hit cash flow targets caused the stock price to jump.

“The Group’s business remains robust and we believe we have sufficient resources to deliver on management’s plans,” said Quindell PLC (LON:QPP) (OTCMKTS:QUPPF) CEO Robert Fielding, in what has to be one of the all-time least comforting PR statements. When the CEO reassures investors that he doesn’t expect the firm to completely run out of cash, times are rough.

Quindell stock price is volatile after today’s announcement

Now Quindell PLC (LON:QPP) (OTCMKTS:QUPPF) is bringing in PwC for an independent review of its “main accounting policies and expectations as to cash generation into 2015.” Assuming that PwC finds its current policies to be unrealistic, we may be in for significant restatements sometime next year. By then, it might not much matter as the stock price continues to decline. Since the Gotham City Research short thesis cut it down from over 600p to less than 400p back in April, it has fallen as low as 43p at the end of last month (and Gotham, which also took down Gowex this year, has made a killing).

The price has been pretty volatile today, but it’s still in the mid 50p range, less than 10% of its one-year maximum value. By the time we hear back from PwC about Quindell PLC’s (LON:QPP) (OTCMKTS:QUPPF) accounting standards it might not have much room left to fall.