“Quindell has met or exceeded its quarterly adjusted operating cash flow
targets in the first nine months of the year. However, the events over the
last few weeks have greatly reduced our visibility on Quindell’s ability to
deliver on these goals.”

The analysts also said that David Currie, Quindell’s interim chairman, should
carry out a review “focusing on wide-ranging topics such as the rationale
for the current group structure, appraisal of the current accruals process…
goodwill impairment tests and a working capital review”.

Canaccord’s focus on Quindell’s cash reflects the stock market’s
pre-occupation with the company’s cash generation.

Quindell estimates how many personal injury and industrial hearing loss claims
it is pursuing will be successful and recognises the revenue in advance.
Once the cases settle, the cash should then flow back to the group. Quindell
has to pay insurance companies upfront for each injury claim.

The Canaccord research note is a blow to Quindell and came as the company
disclosed that its outgoing finance director had effectively offloaded
200,000 shares in the group.

Earlier this month Laurence Moorse, along with Mr Terry and non-executive
Steve Scott, entered into a controversial share sale and repurchase
agreement with American lender Equities First Holdings, an arrangement that unsettled
investors and eventually led to their resignations last week.

Under the deal, the trio effectively sold shares to EFH and pledged to buy
them back in two years time. They said they would use the funds raised from
the agreement to buy more Quindell stock.

However, Quindell said on Wednesday morning that margin calls under the EFH
arrangement with Mr Moorse had been triggered. Mr Moorse, who has agreed to
step down as FD at the next AGM, did not meet the calls and so the EFH
agreement has been terminated, meaning he does not have to buy back the
200,000 shares he originally transferred.

Last week, Mr Terry also said he would settle margin calls by agreeing not to
repurchase the 8.85m shares he had sold to EFH.

The revelations about the Quindell directors’ dealings with EFH forced five
other Aim-listed companies to this month clarify the financing
arrangements that their bosses had with the US firm.

Shale group IGas on Wednesday said that its chief executive, Andrew Austin, “fully
intends” to spend £7.9m buying back the 7.5m shares he transferred to
EFH at the end of the three-year agreement he has with the lender.