Quindell has produced a rebuttal which stretches to 21 pages itself, which can be viewed here. Within it, Quindell accuses Gotham of misrepresenting its market position and disregarding publicly available information in order to bolster its own arguments. It justifies the market-beating margins that Gotham questions by referring to its greater size and strong market position when compared to many peers and also explains that low historical cash flow figures are down to investing heavily in the business, and are already being reversed.
It also addresses allegations that Quindell founder and chairman Rob Terry’s personal investment in the business was to build a country club and not invested in the current business saying that the statement is ‘provocative and misleading’. Quindell points out that Mr Terry has invested around £12m ‘plus over 10 years of sweat equity’. The leisure assets, which were disclosed when Quindell joined the Aim market, have since been sold off and the proceeds reinvested in the technology business.
Further allegations, such as Quindell receiving significant revenues from businesses it actually owns itself are also described as ‘misleading’.
In an attempt to further shore up investor confidence in the business, Quindell says that a number of its directors are intending buying shares ‘once they have received clearance from the appropriate regulatory bodies’.
Although it is early days, and it will take time for investors to digest the 21 page rebuttal, Quindell shares have reacted positively to the announcement, rising 6 per cent today but still well short of the price before Gotham's allegations surfaced.
Nor is today's rebutall likely to silence all of Quindell's critics, especially those suspicious of its acquisition-led growth. That rapid pace of growth has attracted an army of retail investors, many of whom have been rewarded by the rapid appreciation in its share price over the past 12 months. But this week’s roller coaster ride - and the ease with which an anonymous research group could wreak havoc on Quindell's share price - may have left some feeling a little queasy.
Whether the events of the past few days hamper Quindell’s proposed move to the Main Market, for which it has investor roadshows lined up, remains to be seen but it could take a while to repair its reputation in the eyes of some investors. Indeed, while Quindell's many fans may see the sell-off as an opportunity to add to their positions on the cheap, it should be noted that none of the US companies Gotham has previously attacked have yet regained the share valuations that they enjoyed previously.