Banks, Financial

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Economy

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Financial

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Financial

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Banks

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Categorized | Financial, Insurance

Fidelity doubles Quindell stake


Posted on June 30, 2014

Occupy Wall Street Starts May Day Protests Amid Rain in New York©Bloomberg

Fidelity, one of the world’s largest asset managers, has doubled its stake in Quindell, in a vote of confidence for the embattled claims management company.

The move comes as investors and short sellers debate whether Quindell represents a revolutionary new model for the insurance industry, or an overhyped start-up that exposes the risks of London’s junior stock market.

    Fidelity disclosed in stock market filings on Monday that it now owns 10 per cent of Quindell’s shares, making it the company’s second-biggest investor after founder Robert Terry.

    The fund manager started building a stake this year, shortly before a dossier of allegations from a US shortseller triggered a two-thirds fall in the company’s market value.

    Quindell’s shares rose about 10 per cent in Monday trading, valuing Fidelity’s stake at around £90m.

    Short-sellers including Gotham City Research have argued that Quindell’s profit margins cannot be reconciled with those of industry peers or of companies it has acquired.

    However, retail investors have taken to online message boards to defend the company’s prospects vociferously, while Prudential and UBS each own more than 5 per cent of its shares.

    Fidelity’s investment comes from its US-based arm, FMR LLC. Fidelity Worldwide Investment, which manages $275bn in funds from investors outside the US and Canada, said it does not own Quindell shares.

    An increase in US-based investors may come as a relief to Mr Terry, who had to revise plans for a New York investor roadshow and remove details of Quindell’s New York office following Gotham City’s allegations.

    Quindell has substantial operations in North America, employing about 1,500 people in Canada where it acquired a telematics business.

    Fidelity’s stake building in Quindell comes as the company this month heralded a dramatic shift from car insurance to industrial deafness claims.

    “Quindell have migrated our customer base from primarily [road traffic accident] led (80/20) to a mix of [road traffic/employer’s liability/public liability] led by hearing loss claims,” it said in an investor presentation.

    The shift is likely to reduce the company’s cash flow, given that hearing loss claims take longer to process.

    Quindell recently promoted the head of its services business as group chief executive, although it is unclear whether this will reduce the influence of Mr Terry, who owns 10.9 per cent of the company and who continues to have executive responsibilities as chairman.

    The company implemented a 15-to-one share consolidation this month, after issuing billions of shares in part to finance acquisitions of legal, medical and telematics companies. It abandoned an attempt to move to the main London market, following objections from the UK Listing Authority.

    Additional reporting by David Oakley.