By Tom Winnifrith, The Sheriff of AIM | Monday 19 September 2016
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Aussie poltroon Slater & Gordon (SGH) has finally woken up to the fact that the Quindell businesses it bought for £647 million last year were worthless frauds and as such it has today said it is taking legal action against Watchstone (WTG), the renamed Quenron corporate entity. I fear the Aussies are merely throwing a Hail Mary pass and that its case is doomed. Its shares are not 95% down since the deal at just 40 cents for no reason.
The whole world, other than S&G and a few Bulleton Board morons, knew Quenron was a fraud. The evidence was all out there. By the time that S&G completed its transaction, Quindell was already being investigated at a preliminary level by the SFO and officially by the FRC for cooking its books and Quindell's management was aware of the latter. Yet S&G did its own due diligence and so did not demand specific warranties from Quenron. Had it done that it would be on solid ground but it did not. That - and paying £647 million for a businesess the banks would have forced Quindell to sell for only £100 million - was just manifest incompetence on the part of S&G.
Part of the tranasction was a £50 million payment from S&G to Watchstone due this November but until then held in escrow on certain conditions. S&G now says it wants that cash back. Quenron disputes that it has breached any conditions on the escrow cash and so let legal battle commence. Reading the original RNS I am minded to think that Watchstone will prevail but that S&G's own financial position - thanks almost entirely to the Quenron deal - is so parlous that this is a desperate Hail Mary play - it throws out a terribly long shot legal letter and prays.
Psalm 123, verses two and three. King James Version natch, is perhap apt at this point as we consider the actions of the board at S&G.
Behold, as the eyes of servants look unto the hand of their masters, and as the eyes of a maiden unto the hand of her mistress; so our eyes wait upon the LORD our God, until that he have mercy upon us.
Have mercy upon us, O LORD, have mercy upon us: for we are exceedingly filled with contempt.
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