If shareholders in Quindell (LSE: QPP) are hoping that the resignation of founder Rob Terry and others will mark a turning point for the shares, they may well be disappointed. Nor is it yet safe for new investors who might be tempted to catch a falling knife.
All change, or no change?
Possibly the trickiest aspect of the latest announcement from the accident-prone company is to work out whether management has changed as much as it first appears. Mr Terry has resigned as chairman, but will remain as a consultant “with a particular focus on the Group’s key relationships” and “available to assist… in executing strategy.” Board member David Currie has stepped in as interim non-executive chairman, and has begun a process to find a permanent chairman. Finance director Laurence Moorse has agreed to leave the board after 2015’s AGM, remaining with the company for another 12 months to effect an orderly handover: presumably Mr Moorse understands the books. Another associate of Mr Terry, non-executive director Steve Scott, has also resigned.
So who is running the company now? The Group CEO, Robert Fielding, was elevated to the board just last June having previously been responsible for the services division. Mr Terry was thereafter styled ‘chairman’ rather than ‘executive chairman’, though it’s not clear how much he stepped back from management of the company at that time. Certainly being CEO under a dominant chairman is quite a different role from being the one who carries the can. The other executive director is finance director Mr Moorse.
With Mr Terry consulting on key relationships and strategy, it would be easy to imagine that in reality management will remain much as before. The main difference could prove to be that Mr Terry no longer has formal responsibilities as a company director — including things such as, well, reporting requirements relating to company share dealing (though there are legal obligations imposed on individuals deemed to be ‘shadow’ directors).
Nor are cynics likely to be much swayed by the appointment of Mr Currie as chairman. He was formerly an advisor to the Innovation Group, Mr Terry’s insurance venture whose shares lost over 90% of their value between its IPO in 2000 and his resignation from the board in 2003. Mr Moorse was Innovation Group’s chief financial officer and Mr Scott its commercial director in that period.
The kitchen sink
I wrote recently that, were Quindell a normal company, its current problems would lead to a change of management. Shareholders should prepare themselves for the mother-of-all kitchen-sinkings after a new CEO undertook the inevitable ‘strategic review’.
What shareholders seem to have now is the start of a drawn-out change of guard. Chairmanship of Quindell is likely to appeal to few independent candidates, but once Mr Currie is successful in appointing a permanent chairman the new incumbent’s first task is likely to be appointment of a new, external CEO. That role may also be quite a challenge to fill. If regulators or the auditors haven’t stepped in first, presumably the new CEO will then commence kitchen-sinking the accounts, and determining what true value lies in Quindell’s businesses.
There may be a core of value. But there will need to be a lot of digging before investors find gold.
