Gotham City On The Short Case For Quindell PLC (QPP)

We are initiating coverage on Quindell PLC (LON:QPP) (OTCMKTS:QUPPF). The company’s reported profits are materially (42%-80%) incorrect, its operations are exaggerated, and QPP shares are worth no more than 3p/share (90+% downside) for the following reasons:
  • 42%-80% of Quindell’s profits are suspect, as we are unable to reconcile the whole with the sum of the parts.
  • Quindell was little more than a country club until 2008/2009, yet QPP somehow began reporting Microsoft Corporation (NASDAQ:MSFT)/Google Inc (NASDAQ:GOOG)-esque profit margins in 2010/2011.
  • 26%-43% of Quindell’s 2009 and 2010 revenues came from, a subsidiary owned by CEO Robert Terry.
  • 41% of Quindell PLC (LON:QPP) (OTCMKTS:QUPPF)’s 2011 revenues came from an undisclosed related party (controlled by a QPP executive).
  • 10+ acquisitions lack economic substance. Several of the acquired companies are little more than shell/paper companies.
  • QPP’s largest telematics customer is itself (via subsidiaries Himex & Ingenie), accounting for 61% of 2013 revenue.
  • 99% & 80% of Himex’s 2012 and 2013 balance sheets are seriously deficient (Himex is QPP’s largest acquisition).
  • Former executives allege Himex/Navseeker lied to them about its financial state and that in effect they were operating a Ponzi-style scheme.
  • 2011-2013 accounts receivable are between 86%-231% of revenue, while deferred revenue only 1%-2% of revenue.
  • Nearly all of CEO Terry’s £11 mm personal investment into Quiindell was used to build Quindell the country club.
  • No free cash flow and negative operating cash flow.
  • Quindell fails to explain how its personal injury business complies with Lord Jackson’s reforms & referral fee ban.
  • The Chairman of the Transport Select Committee, Louise Ellman recently initiated a probe to determine whether ABSs are used to side-step the Jackson reforms.
  • 3 auditors in 3 years, since 2011.
  • QPP shares would qualify for a de-listing if the shares were trading in US markets.
  • When asked, Quindell PLC (LON:QPP) (OTCMKTS:QUPPF) refuses to answer simple questions about its business.

Quindell PLC: A Country Club Built On Quicksand by gothamcityresearch

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