(Inserts dropped word "not" in paragraph 7)
April 25 British IT outsourcing services
provider Quindell Plc said it had started legal action
against Gotham City Research related to a "coordinated shorting
attack" against the company.
Quindell's shares fell as much as 56 percent on Tuesday
after Gotham City Research questioned Quindell's revenue model
and profit quality in a report published on its website.
Quindell declined to elaborate on the nature of the legal
action on Friday but had said earlier that Gotham City's
comments were "highly defamatory" and "deliberately
The company, which provides services mainly to the insurance
and telecom industries, said short positions were taken in its
shares prior to the publication of the report.
Investors who sell securities short borrow shares and then
sell them, expecting the price to fall so they can buy the
shares back, return them to the lender, pay borrowing fees and
pocket the difference.
U.S.-based Gotham City Research has not said whether it has
taken a short position on Quindell's shares, but says on its
website that it may have long or short positions in the
companies it covers.
Gotham City Research, which does not list a telephone number
on its website, did not respond to a request for comment by
Reuters posted on the "contact us" section of its website.
Quindell's shares initially fell as much as 20 percent after
it said it had initiated the legal action but recovered later
when the company published a detailed response to Gotham City
Research's allegations on its website.
The AIM-listed company said its response should reassure
investors about its "transparent approach." (link.reuters.com/xut78v)
Almost 1.9 billion Quindell shares had traded by 1240 GMT,
when the stock was up 5 percent at 26.25 pence. The stock was
the most heavily traded on the London Stock Exchange.
Quindell, which is planning to move its listing to London's
main market, said it would continue its U.S. investor roadshow
next week as planned.
A number of the Quindell directors will buy shares in the
company after receiving regulatory clearance, Quindell
Vice-Chairman Tony Bowers said.
At 26.25 pence per share, Quindell has a market value of
about 1.62 billion pounds ($2.72 billion).
($1 = 0.5953 British pounds)
(Reporting by Noor Zainab Hussain in Bangalore; Editing by
Gopakumar Warrier and Ted Kerr)