Watchstone — the company formerly known as Quindell — is dumping a bunch of assets for just £1 ($1.50) as it tries to get away from its scandalous recent past.
The firm is selling two companies — B.E. Insulated, a property insulation business, and Carbon Reduction Company, which does property services. Both firms have been bought by the BE Smart Group.
In a statement released on Friday morning, the company said that it expects to save between £1.5 to £2 million ($2.2 to 2.9 million) per year from the disposals, but it will initially lose £4.2 million ($6.1 million)
Watchstone, which is an insurance tech and claims management company, has been in the middle of 18 months of madness since a research note from American short seller Gotham City released in 2014, attacked the accounting practices of the company — then known as Quindell — and called it a “Country Club Built On Quicksand” that was creating “magical” profits.
Gotham’s note included masses of pretty bad stuff about Quindell, including that:
- 42%-80% of Quindell’s profits were suspect.
- 41% of its revenues in 2011 came from an undisclosed source.
- Quindell refused to answer even basic questions about itself, when asked by Gotham.
- Several companies bought by Quindell lacked “economic substance” and basically just existed on paper.
From that point on, things went downhill pretty quickly and the company was investigated by both the Financial Conduct Authority, and the Serious Fraud Office for, amongst other things, misstating its results, overpaying directors, and deliberately overpaying when buying companies.
The company’s shares were suspended from the small cap Aim index in June last year, just before the FCA started investigating Quindell after it admitted that its accounting practices were “at the aggressive end of acceptable.”
Quindell then decided in late 2015 that it should change its name to Watchstone to try and distance itself from the scandal. Friday’s asset dump represents another move from the company’s management to try and streamline Watchstone, and try to reestablish its reputation.
Speaking about the asset sales, CEO Indro Mukerjee said: “The strong focus on quickly addressing losses is central to our work and we’ve been making good progress overall. We’ve acted with integrity and speed to realise significant cost savings, while removing liabilities and enabling us to continue with the further work on the transformation of Watchstone.”