Absolute Capital Management has closed one of its hedge funds and its Mallorca offices in an effort to stabilise the hedge fund group after it demerged Argo Capital, its most successful division.

Aim-listed AbCap on Tuesday reported a pre-tax loss of �32.9m (£26.1m) after writing down �74.1m of goodwill on acquisitions.

The group also warned that potential legal claims for losses suffered by its hedge funds could leave it without the resources to keep trading.

AbCap was plunged into crisis in September when Mr Homm unexpectedly quit, shortly before it was discovered that hedge funds he ran had made undisclosed investments in illiquid US small company shares.

At the end of December the AbCap hedge funds, excluding the healthy Argo business, had assets under management of $1.2bn.

Of this, $275m was held in hard-to-trade US penny shares in parallel funds, which are being run down. The illiquid holdings had totalled as much as $550m after Mr Homm first left.