The share price plunged, a fall exacerbated by news on Thursday that Fidelity
had almost halved its stake in the company. Many traders and analysts think
the the EFH agreement is likely to cast a shadow over Quindell in coming
days.

Under the arrangement, margin
calls are triggered when the three-day moving average of Quindell’s
shares is at 70p or below. To satisfy the calls, the three directors either
have to provide cash or transfer more shares to EFH. So if the share price
stays beneath the 70p level for a third straight day today, the hordes of
private investors who offloaded stock on Monday would not be the only ones
selling. Mr Terry could be forced into reducing his remaining stake, too.

Quindell shares are now valued at 55½p, down from a record 660p in February
and the worst level since the end of 2011, which had proved a pivotal year
for the company. In May 2011, Mr Terry had reversed Quindell, which had
started life as a Hampshire golf and country club, into an Aim-listed shell
called Mission Capital. Quindell was already being transformed into an
outsourcer that described itself as having “expertise in technology,
telecoms, utilities, leisure and retail, which the directors believe has
significant potential for growth”.

And grow it did, predominantly through a spate of acquisitions that involved
Quindell either buying whole companies or stakes in firms. By this February,
Quindell’s market value had swelled to more than £2bn and the group had
become a sprawling range of businesses, including telematics — the black
boxes insurers use to track drivers’ habits — and pursuing industrial
hearing loss cases.

But some institutional investors were worried about Quindell’s cash
generation. They were also wary of its rapid growth, said one fund manager,
who did not invest in the company. The prolific issuance of shares to fund
deals would have put off some investors due to the complex nature of the
acquisitions and the time fund managers needed to spend “understanding
what’s going on underneath the bonnet”, he said. Many private investors,
however, were undeterred and pushed the stock to new heights.

That all came to a juddering halt in April, when Gotham published its 74-page
dossier on Quindell that wiped more than £900m off the company’s market cap
in a single day. The High Court later ruled
in Quindell’s favour in a libel case against Gotham after the
US firm failed to provide a defence.

Yet since the Gotham attack, the Quindell share price has plunged 90.5pc. In
June, the stock was knocked a further 20pc after Quindell disclosed that its
long-awaited move to a premium listing of the stock exchange had been
blocked by regulators. In a further blow, the RAC pulled out of its
telematics joint venture in September.

This latest controversy, over director share dealings, could have far-reaching
repurcussions, analysts suggested.

“No one should be putting money into this stock until there has been a full
review,” said Lorne Daniel, an analyst at finnCap. “I think it needs the
regulators to step in.