If you don’t know why Quindell PLC (LON:QPP) (OTCMKTS:QUPPF)’s share price fell sharply last Friday to top off a rough week, the company wants you to know that you’re not alone. In an announcement that seems to have put investors’ concerns at ease and brought the stock back up 5% in trading today, Quindell management decided to plead ignorance.
“The Board of Quindell Plc… notes the recent share price performance and confirms that it knows of no reason for such falls,” the company wrote.
You could make fun of the announcement as being particularly devoid of anything new, but the real reason for investor optimism is pretty clear: Quindell PLC (LON:QPP) (OTCMKTS:QUPPF) put ‘positive progress’ and ‘cash performance’ in the same sentence.
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Quindell says it will hit cash targets
There has been a lot of short interest in Quindell PLC (LON:QPP) (OTCMKTS:QUPPF) since the beginning of the year, which may explain why its stock price was falling last week even though there wasn’t any new solid information about the business, but what has actual shareholders most concerned is Quindell’s cash position. Last quarter, Quindell reported a big jump in revenue, but cash fell from £199.6 million at the end of 2013 to £85 million at 1H14. At that rate it could be in danger of running out of cash early next year before all of those accrued earnings actually get paid.
Quindell PLC (LON:QPP) (OTCMKTS:QUPPF) management has repeatedly assured investors not to worry because it will hit its cash goals for the rest of the year, and this latest announcement reiterated that we can expect to hear some good news by October 15 at the latest. That’s still quite vague, but the company must realize that any attempt to wiggle out from these assurances or kick the can further down the road would wreck its credibility.
Cash performance won’t end controversy, but will placate nervous bulls
Quindell PLC (LON:QPP) (OTCMKTS:QUPPF) will continue to be a controversial stock because it has a complicated structure, a weird corporate history, and detractors convinced that its revenues are inflated. Turning accrued earnings into cash may not be enough to push Quindell’s stock price back to recent highs, but it would guarantee bulls that the company will survive long enough for the controversy to play itself out. For anyone convinced that Quindell is a solid company with a depressed stock price, it’s going to be a long two weeks.