Europe Braces for Activist Fund Invasion, Quindell PLC (QPP) Scares

Quindell Plc QPPQuindell Plc QPP

As insurance claims outsourcing company Quindell PLC (LON:QPP) (OTCMKTS:QUPPF) comes under attack from short sellers, Robert Burrow, a director of the Company, speaks with his actions, not activist investor words. Burrow purchased 150,000 ordinary shares, and he and his family interests now own a total of 15,925,000 ordinary shares in the London-based firm.

Europe prepares for new investment strategy

As the European continent prepares for a wave of new activist hedge funds, following the success of the bullying tactic in the US, the Quindell PLC (LON:QPP) (OTCMKTS:QUPPF) attack may serve as their first look at the aggressive and sometimes manipulative strategy.

Quindell: Gotham Research reported to regulators for role

The latest salvo against Quindell PLC (LON:QPP) (OTCMKTS:QUPPF) didn’t come from a large hedge fund activist investor, but rather a research report from Gotham City Research, which has been accused of being a short seller.  And in typical US activist investor, it was classic slash and burn.

“A Country Club Built On Quicksand”

In a report titled, “Quindell: A Country Club Built On Quicksand,” Gotham claims the company’s shares are worth no more than 3 pence.  After Gotham released the report, Quindell PLC (LON:QPP) (OTCMKTS:QUPPF) issued a 12,500 word rebuttal as news that Deutsche Bank AG (NYSE:DB) (ETR:DBK) had just pulled out of a planned road show to pitch Quindell to US investors.

The main points in the Gotham research point to Quindell PLC (LON:QPP) (OTCMKTS:QUPPF) having negative cash flow and rising debt, which Quindell says is due to investing in the future through research and development.  The books of Quindell have been called into question, as an intriguing and obfuscating web of acquisitions and related party transactions raise questions regarding current management and board of directors.

It is these type of activist revelations, like a Band-Aid being ripped off a scab, for which European investors must prepare.

The tables are turned as Gotham Research now target

Gotham’s aggressive attack on the board might get Carl Icahn’s attention for a potential activist cub, but unfortunately for Gotham their activities may also get attention of an unwanted kind.  Quindell PLC (LON:QPP) (OTCMKTS:QUPPF) on Friday said it has initiated legal action against Gotham City in what it calls a “coordinated shorting attack” and has reported Gotham to the Financial Conduct Authority, according to a report on Motley Fool.

Davide Serra, the chief executive of hedge fund Algebris Investments, who holds a two per cent stake in Quindell, said the company he has also reported Gotham City’s actions to both the FCA and the US Securities and Exchange Commission, the report said.

Get ready for the next major US export, Europe.  It’s called “activist” investing.  You might recognize the strategy’s roots from your childhood days in dealing with the schoolyard bully.  Mostly in the US, the bully wins this game.



About the Author

Mark Melin
Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)valuewalk.com