Small shareholders who claim they were cleaned out by the Quindell scandal have initiated legal action against the AIM-listed company to the tune of £9.5m.
The potential lawsuit, led by the firm Your Legal Friend, is the first to be brought against the insurance software company, which last month rebranded as Watchstone to distance itself from former management.
Your Legal Friend has sent a letter of claim to the company on behalf of 342 retail investors initially, warning that the number could rise as it has been contacted by more than 1,100 so far.
It has asked for answers about a number of the issues being investigated by the Serious Fraud Office, including accounting practices under the guidance of founder and former chairman Rob Terry, who quit last November amid a share-dealing scandal. Some investors are thought to have lost as much as £100,000 each in the share scandal.
Colin Gibson, the chief operating officer at Your Legal Friend, said: “This letter of claim is the next significant step towards shareholders recovering compensation for their investment losses.
“We expect the size of the claimant group to continue growing.”
Shares in Watchstone fell 2.25p to 95p yesterday.
