Quindell shares crash 50pc on damning Gotham note

Following publication of the research, which was flagged on Twitter, Quindell’s shares plunged as low as 18.5p, down from the high of 40.25p they had reached in lunchtime trade. As the market digested the claims, the shares were down 26pc, wiping more than £500m from Quindell’s market capitalisation.

Quindell, which uses its software to provide services to insurance companies enabling them to cut operating costs, hit back in a regulatory statement, calling Gotham’s claims “highly defamatory, deliberately misrepresentative”.

“The board of Quindell is aware of the publication today by Gotham City Research LLC,” the statement said. “The board rejects the assertions raised in this note and considers the note to be highly defamatory, deliberately misrepresentative and entirely rejects the conclusions that are made.”

It added that Quindell is “consulting its legal advisors on what immediate action can be taken against Gotham City Research LLC”.

Quindell also warned that is reporting co-ordinated alleged short-selling of its shares to the authorities.

Gotham’s note alleged that more than fifth of Quindell’s 2011 revenues came from “an undisclosed related party controlled by a QPP executive”, that more than 10 of the company’s acquisitions “lack economic substance” and that several of the “acquired companies are little more than paper companies”.

The British company has been targeted before in so-called “bear raids”, when an investor tries to force down the price to cover their short position in the shares. Last May Simon Cawkwell - known in City circles as “Evel Knievel” - took a large position short position in Quindell before the shares fell nearly a third.

Little is known about Gotham. Its website says it "focuses on due diligence-based, special situation investing". However some speculate that it could be a hedge fund as the website goes on to add: "As of the publication date of our articles, we may have long or short equity positions in the companies covered."

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