The U.K. Financial Conduct Authority opened a probe into Quindell Plc’s accounting, one year after the technology company was accused of misreporting financial results by a short-seller.
The FCA said Wednesday it’s investigating “public statements made regarding Quindell’s financial accounts” in 2013 and 2014, after the company announced it had suspended trading in its shares. Quindell said it was reviewing its financial statements and had found some of its accounting policies were “at the aggressive end of acceptable practice.”
Quindell came under scrutiny last year after New York short seller Gotham City Research LLC published a report in April 2014 making serious accusations over its finances. The report triggered a 39 percent one-day drop in the software provider’s shares. Quindell won a U.K. libel judgment against Gotham in September.
Quindell said in a statement Wednesday the board has “commenced a review, along with its auditors, of a number of the company’s historic transactions and acquisitions.” The company said the issues in question “are largely non-cash items and the board will make clear the outcome of this work.”
Shares of the company will resume trading “as soon as practicable and no later than publication of the group’s 2014 financial statements.”
PricewaterhouseCoopers LLP reviewed Quindell’s accounting policies in recent months and declared “certain policies were not appropriate,” according to the company.
Professional Services Sale
Quindell announced in May it was selling its Professional Services Division to law firm Slater & Gordon Ltd. In the statement Wednesday, Quindell said changes to its accounting policies will affect previous recognition of revenues and profits in the division.
Slater & Gordon said in a separate statement that its assessment of the division wasn’t based on Quindell’s financial statements.
“We have always been of the view that the accounting policies of Quindell’s Plc were aggressive,” Slater & Gordon said. “Quindell’s historic accounting policies were irrelevant to our valuation.”
Gotham, a little-known company founded by a man named Daniel Yu, has issued a number of reports claiming to expose dubious practices at companies. In July 2014, it had its biggest victory when its report on Let’s Gowex SA led the Spanish Internet provider’s chief executive officer to resign and sparked a criminal investigation.
Gotham, named after the city where Batman fights crime in comic-book adventures, has attracted controversy over some of its tactics. In the Gowex case, the company published its report while holding a short position in Gowex’s stock, driving down the share price.