The 12 worst investments of 2014, #3: Quindell

Performance in 2014:  Since the start of the year, Quindell’s share price has fallen by 88.3%.

See all 12 of 2014’s worst investments here

What happened?

The outsourcing firm Quindell (LSE:QPP) has certainly had a rollercoaster of a year. Thanks to projections of fast growth, its shares surged from 292p at the start of the year to a peak of 682.5p in April.

However, the controversial research firm Gotham Capital then released a report, querying whether the accounts were accurate. Last month, several directors, including the founder, were found to have taken out a loan that enabled them to sell their shares in the company without having to disclose it. The shares now trade at 34p.

Who are the losers?

Almost everyone associated with the firm is feeling the fallout. Founder Rob Terry, finance director Laurence Moorse, and non-executive director Steve Scott have all been forced from the board. House brokers Cenkos and Canaccord are also under investigation by the FCA. Ironically, Quindell won its libel lawsuit against Gotham, after the research firm didn’t bother to defend its claims.

Who are the winners?

The big winner is the secretive hedge fund Tiger Global, which placed large bets against Quindell’s shares before the crash, using shell companies. Tiger’s actions were condemned. However, the Irish Times’ Proinsias O’Mahony thinks that the subsequent revelations vindicate them, and show “how careless institutional investors can be with clients’ money”.

What happens next?

Quindell appointed a new CEO in June and called in the accountants PwC to get the accounts straight. However, investors are preparing to launch a lawsuit against the company and directors. In a bizarre twist, the action is being led by one of Quindell’s competitors, Your Legal Friend.

Meanwhile there is increasing pressure at the European level to tighten up short-sellers’ disclosure requirements.

What have we learned?

If things look too good to be true, they probably are.

See all 12 of 2014’s worst investments here