London-listed Plus500 Ltd saw its shares lose over 10% percent of their value on Monday (June 8) after the online trading platform said that its outlook for 2020 remains unchanged. The company, a constituent of the FTSE 250 index, said its revenue stood at $249.0 million in the second quarter to date, but customers' trading gains reduced that figure to about $102.5 million.
Unlike other operators in the sector who act as intermediaries for customer bets on financial markets, Plus500 does not generally hedge the bets it takes. This means if the customers bet correctly the broker can lose money and vice versa.
However, the company said it maintains a substantial level of cash- its cash balance is currently approximately $473.9 million- to support current and future levels of activity, including potential fluctuations in customer trading performance.
Plus500, which has added 100,000 new customers in the second quarter, also said the customer-trading performance has resulted in a significant rise in the level of net client deposits, which are currently approximately $488.4m, three times the level as at 31 December 2019.
(Plus500 Share Price Performance 03-09/06/2020 on London Stock Exchange)
Over time, the Israel-based company expects the trading results to have a neutral effect on its business. Plus500 did not specify which asset classes or traders were involved in the losses but mentioned the bulk had come in recent weeks, most particularly, the week ended 5 June, when equities and oil rallied sharply.
Online brokerages tend to see record increases in new accounts and trading activity during periods of market volatility, such as the one caused by the coronavirus crisis which has spurred a boom in bets.
Vulnerability for companies around the world tempted individual investors to seize on this year’s erratic stock swings.
"We have consistently stated that Customer Trading Performance is subject to significant market movements and is therefore likely to fluctuate. This is magnified during periods of heightened market volatility such as those we are currently experiencing and given the growing scale of the business. Nonetheless we continue to expect this performance to revert to a medium-term historic level of near zero and our outlook for the year remains unchanged" Mr David Zruia, Interim Chief Executive Officer, commented.
Photo: Michael Martin Plus500 Associate, Twitter https://twitter.com/Michael86259668
Mr Michael Martin, Plus500 associate commodity forex and cfd trader and broker, told Investopress that Plus500 is an honest and prompt trading platform especially for beginner traders as its technical instruments are easy to understand. Mr Martins added that it is also user friendly for advanced traders.
Plus500 was founded in 2008 by six alumni of the Technion - Israel Institute of Technology: Gal Haber, Alon Gonen, Elad Ben-Izhak, Shlomi Weizmann, Omer Elazari and Shimon Sofer. In 2018 its shares were listed in the main market of the London Stock Exchange.
The company, which is regulated in the EEA, UK, Australia, South Africa, Israel, New Zealand, Singapore and the Seychelles, is valued at around £1.2bn. Plus500 shares have gained more than 25% so far this year.