10th Nov 2014 11:07
LONDON (Alliance News) - Quindell PLC saw its shares fall Monday, even after it tried to reassure investors about a recent deal done by several of its directors who took out loans to buy shares and put some of their share holdings up as security for the deal.
On November 5, Chairman Robert Terry, Finance Director Laurence Moorse and Non-Executive Director Steve Scott bought nearly 1.6 million shares in total, using funds from a loan provided by Equities First Holdings LLC, a US company which describes itself as "a pioneer in stock loans". A company controlled by Scott, Bickleigh Ridge Ltd, also bought 175,000 shares using the same mechanism, it was announced two days later.
In a statement Monday, Quindell said it wanted to clarify the transaction, setting out the exact number of shares that had been transferred to Equities First.
It said the deal with Equities First is a sale and repurchase agreement, and the three directors had transferred the legal and beneficial interest in "a number of shares" to the US company in return for a payment from Equities First of a sum equal to 67% of the three-day average market value per share less a financing arrangement fee of 3%.
Quindell noted Equities First can legally do as it pleases with the transferred shares, but said it has undertaken not to vote them, and has said it won't engage in any short selling activity.
The three directors are contractually obliged to buy back the security shares two years from when they got the payment from Equities First, and "have informed the company that they fully intend to", it added.
They will be bought back at a price equal to 69% of the three-day average market value per share applicable at the date of entering into the facility, less margin calls paid, it said.
However, the directors may be required to make margin calls if the Quindell share price fluctuates wildly. If the share price falls to 80% or less of the value at the time they were transferred to Equities First, then they'll have to transfer more of their holdings to the US company or to provide cash to satisfy margin calls, Quindell said.
"As previously stated and as demonstrated by the initial purchases made by the purchasing directors and the fact that the majority of the board has acquired shares recently, we believe the current market valuation of the company is materially below its true value," Terry said in a statement.
"In entering into the sale and repurchase agreements to provide finance, each of us purchasing directors relied upon assurances from EFH that, notwithstanding EFH's legal rights, the custom and practice of EFH was that the shares transferred would not be disposed of outright, other than in a default event and will be held by their custodians throughout the term of the agreement, nor would they engage in short selling activity," he added.
Before the deal, Terry had a holding of nearly 45.7 million shares. He has transferred 8.85 million to Equities First for an aggregate purchase price less the 3% facility fee of nearly GBP7.5 million. He used the facility to buy 1 million shares at 123.47 pence, leaving him with 37.8 million shares with voting rights, or an 8.66% stake, after the deal. However, his overall interest in Quindell shares has risen to nearly 46.7 million, a 10.69% stake.
Moorse, meanwhile, had nearly 1.2 million shares and transferred 200,000 to Equities First for GBP168,714, which he used to buy 50,000 more shares for 123.00 pence. That's left him with just over 1 million shares with voting rights, but his total interest in Quindell shares has risen to over 1.2 million.
Scott had 5.1 million shares, transferred nearly 1.4 million to Equities First for just over GBP1.1 million, bought 525,000 shares at 123.83 pence and 175,000 at 120.88 pence, leaving him with nearly 4.5 million shares with voting rights, and an interest in just over 5.8 million shares.
"The agreements would not have been entered into if the board did not remain confident of meeting full year market expectations and of the company's longer term prospects," Terry added.
"We have made this further announcement to ensure the market is aware of the actual number of shares transferred to date under the agreements. Further announcements will be made when more shares are to be used to fund further purchases of Quindell shares in the future," the chairman said.
"For clarity, purchasing shares at the current valuation has been the motivation for entering into the agreements. The agreements are purely to provide funding for a two year term and I and Laurence intend to use the funds received under the agreement to purchase Quindell shares and to cover any associated potential tax liabilities and margin calls relating to the Agreements, with Steve Scott intending to do the same and also cover certain other tax liabilities," he added.
In a separate statement, Quindell said it had been informed that Terry on Monday bought another 250,000 shares at GBP1.0225 a share, taking his holding of voting rights shares to 38.05 million and his total interest to 46.9 million shares.
Quindell shares were down 10.7% at 105.78 pence Monday morning, having been down nearly 20% in early dealings.
By Steve McGrath; [email protected]; @stevemcgrath1
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