Shareholders are bringing legal action against Watchstone Group PLC, formerly Quindell, the AIM-listed company embroiled in one of the most contentious acquisition deals in legal sector history.
Investors claim that they suffered losses as a result of misleading statements or omissions in Quindell’s representations to the London Stock Exchange which wrongly suggested the company was in good financial health.
The claim alleges that Quindell provided misleading information and/or failed to disclose material facts to its auditors and that it overstated its revenues and profits, among other things.
The claims will be brought pursuant to section 90A of the Financial Services and Markets Act 2000, which provides a remedy for misstatements and omissions by listed companies. Specialist litigation firm Harcus Parker sent a letter before action to Watchstone today.
Last month, Watchstone settled Slater and Gordon’s £637m claim hours before a trial was due to begin. Slater and Gordon was suing the company for the full value of its 2015 acquisition – a purchase which was followed by a plunge in profits and the collapse of its parent company’s share price. Watchstone said it had spent around £6.6m on legal costs fighting the case.
Watchstone was countersuing for £63m, arguing the acquisition was under-valued because of issues with disclosure in the build-up to the deal.
A Serious Fraud Office investigation into Quindell is ongoing and the Financial Reporting Council has sanctioned two firms of auditors over their conduct in relation to the company’s accounts.
Jennifer Morrissey, a partner at Harcus Parker, said: ‘We are rapidly building a cohort of shareholders who suffered significant losses when the share price collapsed when the truth started coming out, and we hope Watchstone will recognise the failures of its predecessor and compensate them without the need for a drawn-out legal fight.’
A source close to Watchstone said the company ‘plans to vigorously defend itself against all such claims as appropriate’.