Plus 500 could it be a minus?

Sunday, Jan 13 2019 by
11

Having been out of the market since October 2017, as mentioned here at the time, it is obvious that I am a cautious investor, which perhaps comes from my many years building a financial services company. I am not ready to buy back in yet, but I have been preparing the way and looking at companies that I believe may make good investments. Plus 500 stands out like a beacon of light. As I completed my analysis, I wanted to buy there and then but it was Saturday--an almost perfect company, the thought flickered through my mind “if it is too good to be true” but I dismissed it immediately. When I awoke this morning, Plus was on my mind and I was directed to the Stockopedia blog. I tend to take notice of such happenings as they have both saved and made me money in the past—and there it was an observation from Ed Croft dated 30th May 2018 directing me here https://ftalphaville.ft.com/2018/05/29/1527566400000/Plus500--past-performance-is-no-guide-to-the-future/ with an associated further article. I returned to my desk and wrote across the analysis sheet “they would say that wouldn’t they”!! and binned it.

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As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. The author may own shares in any companies discussed, all opinions are his/her own & are general/impersonal. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.


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Plus500 Ltd is an Israel-based company that develops and operates an online trading platform for individual customers to trade contracts for difference (CFDs). Its online trading platform allows its customers to trade CFDs on over more than 2,200 different underlying global financial instruments comprising equities, indices, commodities, options, exchange-traded funds (ETFs), crypto currencies and foreign exchange. The Company enables individual customers to trade CFDs in more than 50 countries. The trading platform is accessible from various operating systems, such as Windows, iOS, Android, and Surface, as well as Web browsers. more »

LSE Price
669p
Change
4.6%
Mkt Cap (£m)
724.6
P/E (fwd)
5.4
Yield (fwd)
11.5



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190 Posts on this Thread show/hide all

rpannell 12th Feb 31 of 190

A 37% drop appears to be very harsh. Marketing spend is totally discretionary so if PLUS wanted to, they could reduce marketing to maintain 2019 profits. The fact that they intend to maintain the marketing spend means that the company has faith in the 2020 numbers. It will be interesting to see what analysts are pencilling in for 2020.

At some time, all the shorters will have to re-buy. I wonder when that will be.

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gus 1065 12th Feb 32 of 190
1

No position in Plus500 (LON:PLUS) either way but the market judgement does seem harsh. Reading the trading statement, it seems very upbeat until you get to those two little words “materially lower” in the current trading section.

https://www.stockopedia.com/share-prices/plus500-LON:PLUS/news/plus500-ltd-preliminary-results-urn:newsml:reuters.com:20190212:nRSL6981Pa/

I wonder if this morning’s selling is a fair appraisal of the position or maybe a panic induced by the shorters selling further to spook the retail holders? Volume traded doesn’t seem huge as of yet (although maybe a delay in the data feed) so it could be a classic broker tree shake before some of the shorters try and cover their positions. Then again, maybe the emperor has no clothes on after all ...

Gus.

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Ron1302 12th Feb 33 of 190

Aye well no one seems to have seen this coming!!

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dscollard 12th Feb 34 of 190

In reply to post #446178

I'd hazard there were a lot of stops around the £12 mark (previous low from Oct '18) so probably a good bit of technical selling adding to the opening liquidity.
Given the bounce I reckon there's some covering going on , will be able to see in a day or two who's tightened up (FCA disclosures)

Website: runprofits.com
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dscollard 12th Feb 35 of 190
5

In reply to post #446188

irony? Over 10% of the total shares in issue saw this coming. Shorters provide very useful information when read correctly. Bit like any ecosystem, when you see a load of sharks circling there's normally a good reason.

Website: runprofits.com
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timarr 12th Feb 36 of 190
5

If I read the figures correctly, they've been averaging 7,000 new customers per month in the second half of the year, when the ESMA regulations kicked in, compared to over 15,000 per month in the first half. In comparison, last year they were getting over 20,000 new customers a month. ESMA didn't hit until August, the current monthly figures will probably be slightly worse than that.

As a number of people, including Graham Neary, have previously pointed out, Plus500 (LON:PLUS) has been dependent on churn of naive customers - so this looks like a major problem for their business model. It is, however, exactly the result that ESMA was supposed to produce.

You'd also have to question why they've been actively buying back shares when they could see the underlying trend. They bought back another 10,000 at £14.85 only two weeks ago and it looks like they've spent about £14 million of shareholders' funds on buybacks since the October trading update. Why?

timarr

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Ramridge 12th Feb 37 of 190
4

Dependency on churn may also explain why they cannot afford to cut marketing spend

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mmarkkj777 12th Feb 38 of 190
1

I bought in at 1,060p

I've just sold half because the bounce back is hitting resistance at 1140p to 1170 levels. If it doesn't break through this shortly I'm going to sell the rest (but happy that I have more than made up for the loss on my initial position, in my Naps portfolio).

Will be interesting to see how today pans out for this stock.

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Edward John Canham 12th Feb 39 of 190
2

Spent most of the morning with my hands in cold water.

There is a Liberum note on ResearchTree which gives further detail, although to be frank I'm still struggling with "P&L gain" and probably require a couple more reads.

Timarr - agree the share buyback looks questionable/misleading.

Decider for me was the cut in dividend payout to 60% - little confidence being displayed.

Phil

(No longer hold)

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dscollard 12th Feb 40 of 190
7
Plus500's disclosure of how much client losses boosted its fourth-quarter revenue highlights the trading platform's volatile earnings, Canaccord Genuity says. Plus500 made a $56 million gain on client losses in the quarter, or $172 million over the year. "This admission of the extent of client losses/profits will be seen as introducing unexpected volatility to earnings and just serves to reinforce the point that this should be a single digit PE [price-to-earnings] business," Canaccord says. The investment bank also says Plus500 disappointed on customer recruitment and costs of customer acquisition, and keeps a sell rating on the stock. Shares down 30%

Cannacord's 2ps worth

Anyone in need of a bit of schadenfreude .... Noticed that the short interest had dropped and checked the funds... Highline Capital might have closed their  position a bit early ..as in last Friday ... that has to sting a bit

5c62a9aecd3cf2019-02-12_11_08_31-runprof



Website: runprofits.com
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UK_Investor_8888 12th Feb 41 of 190
1

I've topped up this morning @1162, currently hold 9315 shares at a -10.49% loss (so about 1250 will break even again).

Not sure what to think. PLUS is a smoke and mirrors company. My interpretation of the results is that its no longer going to be a business that grows at 50% per year, it will (if it survives) become a more normal company growing at the more normal single % per year.

At the end of the day, this investment is in a casino business (like with Robert De Niro). We are making our profits exploiting people.

There is smoke and obfuscation in the report wording.

I have a feeling today is the planned exit day for the Short Sellers who know today is their best day to get out.

Long term: Is the short sellers list increasing after today?

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wilkonz 12th Feb 42 of 190

I bought Plus500 before reading the warning at the start of this thread (see my earlier post) and I'm now down 32% (I didn't have a stop loss as I decided in my wisdom that this was a buy-and-hold stock). In any event the fall in price was so fast there would have been slippage. Whilst I think the market has probably over-reacted, I'm planning to keep my current shares but not buy any more. At least not for the time being. It's usually a mistake - I've read - to double up on shares that have fallen in value. But I confess I'm tempted on. this occasion - unless the Plus500 balance sheets and income statements are falsified the current price (£11.00 at the time of writing) is a bargain.

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UK_Investor_8888 12th Feb 43 of 190

Wilonz. I read your post, and I'm so glad you did not Stop-Loss. I topped up today. If you an afford a top-up, its probably mathematically in your favour to average down today.

As you correctly say, if there is no falsification and accounting manipulation, PLUS may be at or nearer fairer value today.

We've been here before in the history of PLUS. It reached 2000 last year. We've had drops in the past.

Good luck to you, to all of us, and think of the customers!

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wilkonz 12th Feb 44 of 190
1

In reply to post #446328

UK-Investor_8888 many thanks for that encouragement. I suspect you're right - this may be an instance in which averaging down is profitable. Providing they can continue to pay the dividend (I note dividend cover is 4.0) it won't be that much of a gamble. But I'll wait another day or two before buying more just in case there's any more bad news in the pipeline.

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UK_Investor_8888 12th Feb 45 of 190

Some other readers don't like my comment. Admittedly, we are playing with fire here. £12.50 and I break even. It must be a bit pants if you are an investor who bought in @£20 last summer.

Keep calm!

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JohnWR 12th Feb 46 of 190

I'm quite new to this game and have read all the above comments with interest. I bought a modest holding in January at 1489p and rightly or wrongly have doubled up early today at 1052p. I suppose time will tell whether or not that was a wise move or an expensive lesson learned...

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UK_Investor_8888 12th Feb 47 of 190

On the website now:-

Dividend Ex Date 21/02/2019 USD $0.6191 paid 09/07/2019

That may help.

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wilkonz 12th Feb 48 of 190
1

JohnWR - looks like you've done well so far if you bought at 1052 as they're hovering around 1150 now. Hopefully not a dead cat bounce. My guess is. that there will be some volatility in the price for a few days - if not weeks. So I'm sitting on my hands.

UK_Investor_8888 - Thanks for the info about the dividend. My gut feeling is that these shares could go down below £10 as they did for a short while this morning. So I'm very much watching and waiting.

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Trident 12th Feb 49 of 190
3

Whats the guidance for statements of 'materiality'. My memory was that in the 10% zone in City speak.

I think that someone suggested that there would be a 50% reduction profits according to their calcs. To me that would be significantly below expectations rather than materially.

Obviously it would be better all around, if the company were more specific about the range they were considering rather than mystic utterances known only to a few.

Anyone with other views?

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UK_Investor_8888 12th Feb 50 of 190

It all boils down to the last 2 paragraphs in today's report:-


"Given the encouraging operational start to the year and the significant market opportunity, the Group intends to maintain its ongoing marketing investment. This, combined with the anticipated lower revenue, is likely to result in 2019 profit being materially lower than current market expectations.

Underpinned by technology, and given its scale, its culture of compliance and its commitment to outstanding customer service, Plus500 is set to benefit over the medium to long term from the stricter regulatory oversight, and to generate growing and increasingly sustainable returns over time. "


The language is very obfuse, not a number. WTF does this mean?!


I agree with Wilkonz. I have a feeling more Short Sellers need to shake the tree and get out and it may touch below £10 before the long crawl back up.


By my estimate about 5% of the shares circulated today in volume (not got the detailed figures - they would be fascinating to see).

I may personally top up @£10... but I think I'll wait and see.

Hold tight fellow shareholders.

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