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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Disclaimer:  

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

AimInvestor85 14th Feb 91 of 190
4

I’ve had a read back through their June 2018 main market prospectus (they moved from Aim to the main market then, so had to release one). Link is here:
https://www.plus500.com/Docs/Plus500UK/Prospectus.pdf

It’s misleading throughout and full of contradictory and wishy washy statements. They basically lie around their P&L gains/losses from client positions.

Page 59 says that the group earns revenues from gains or losses from client trading positions, but the amount was “marginal” in 2017, 2016 and 2015. $103m our of total revenue of $437m isn’t “marginal”. This amount isn’t disclosed anywhere, and throughout it gives the impression that they generate revenue through client trading spreads plus overnight charges for holding a position. No mention of how big their revenue from market P&L from client wins/losses is.

Amazing that they got away with it!

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glanners 14th Feb 92 of 190
1

In reply to post #447573

Shouldn't this be reported to the FCA or some other regulatory body? I based my investment case on revenues being generated by spreads/overnight charges and not on irregular market gains/losses. This is the first I've known about it and had to sell my entire holding this week (which was painful) as it fundamentally changed my analysis.

Edit: Not just us that noticed this then: "Plus500 said in the prospectus in June that windfall profits/losses gained from customers’ trading positions amounted to only “a marginal component” of the group’s overall revenues. However, in disclosures alongside the profit warning on Tuesday, it said that it had lost as principal $103 million in 2017, equivalent to more than 23 per cent of revenues for the year."

...

"One analyst, who declined to be named, said: “They were hiding the nature of the business.”"

Source: https://www.thetimes.co.uk/art...

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AimInvestor85 14th Feb 93 of 190
2

I hadn’t seen that Times artcile, but I think that analyst has summed it up pretty well. I imagine they will be getting some heat from the FCA on this now.

I feel for you glanners, as investors were duped about the business here. And the company’s advisors seemingly signed off on it as well. In those instances, not sure if there’s anything you could have done so just have to put it down to bad luck (?). Some analysts were somewhat calling it on the basis that they didn’t understand how they were making so much money, but that’s easy for us to say now in hindsight

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herbie47 14th Feb 94 of 190
2

In reply to post #447273

Well yes it's ok to take some profits, I agree but it's more the quantity and timing, they have sold over 11m shares in a few months, they have not sold before, one sold over £110m, he reduced his stake by about 75%, these sales are massive. You should be asking why.

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UK_Investor_8888 14th Feb 95 of 190
2

https://shorttracker.co.uk/company/IL0011284465/

PLUS.L Shorts down from 13% to 5.28% latest data.

I have a feeling we will test 980 to 1000.

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mmarkkj777 14th Feb 96 of 190
1

I remember Evil Knievel (Simon Corkwell) wrote a really interesting piece on Plus500 (LON:PLUS) around the time they were promoted to the main market. I'll have to dig it out and provide a link, but essentially saying he was surprised that they hadn't been shut down, never mind promoted. He regarded them as nothing more than a modern day bucket shop (his thoughts, not necessarily mine :-) ).

I'm an interested observer at the moment. I think there will be another bounce, but who knows where the bottom is going to be (I do hold in my Naps, but then, its that sort of spread the risk portfolio).

When it bottoms out, and the rest of the shorters have to cover their positions, I may be interested as a trade, but no interest as an investment proposition.

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glanners 15th Feb 97 of 190
5

More from the Times: https://www.thetimes.co.uk/edition/business/plus500-may-have-misled-shareholders-over-losses-n8cmxsrqw

"According to one person present, Asaf Elimelech, 38, chief executive, and Kieran McKinney, head of investor relations, described the annual report’s inaccurate claim as “a typo”, which led to more angry questioning. “Their claim was met with incredulity,” the source said."

They should also ask management why this loss wasn't disclosed in the 2018 prospectus either, let me guess, another typo right? Well that typo mislead investors and helped founders sell a lot of shares @ £15.50. It also made it impossible for private investors to value the company as we didn't know what percentage of revenues were from one-off market gains/losses until last Tuesday. This is a management not to be trusted.

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wilkonz 15th Feb 98 of 190
1

In reply to post #447988

Pretty discouraging news for shareholders, Glanners. I think the share price is heading south fast. Might be a good time to go short.

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UK_Investor_8888 15th Feb 99 of 190

I've topped up @9.79. Now had a day low of 9.37.

At the moment, I'm hanging on hoping there will be a recovery over the next 3 months.


In theory, The Short Sellers have still got 5% more to sell and so the negative news in the business pages is helpful to their cause, as is any panic. Even my Dad sold his tranche running to the safety of BP and RDSB.

Looking at the history, we've reached the same low today of 17/12/2017 of 938.

The next historical marker is 11/12/2016 396.

Its just a hunch, but I expect this is over-dramatic, in the short term, maybe another -10% to go, then a slow crawl back to real value if/when the business proves it can still deliver the expected profits.





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Snoo 15th Feb 100 of 190
5

Credibility seems a real issue here. Just how can you have a typo in an annual report? They could have released another RNS correcting it if it had happened.

That leaves us between a choice between incompetence or dishonesty, neither of which are that great.

The kind of customer churns suggests to me the markets don't know if the level of profits are going to be sustained, and not hedging brings around a huge level of uncertainty.

Forced transparency over their business model might be a bad thing for them.

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UK_Investor_8888 15th Feb 101 of 190
1

I've got to express some incredibility with Stockopedia's report:-

https://www.stockopedia.com/share-prices/plus500-LON:PLUS/

2019E Yield Estimate is now showing 14.3% (only covered 1.14).

There is that Israeli Withholding Tax issue which snips us overseas investors.

Also, I would have thought that they will downgrade to increase cash ratios in the business given the risks and their increasing cost of sales / spend.

Stockopedia - we could really do with a SHORTS metric on the stock report please.

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glanners 15th Feb 102 of 190
1

Excluding market P&L you have revenue of $100m for Q3 and Q4. If you use 45% revenue to profit margin, include FX and dividend withholding tax, as well as the 60% payout ratio you have an annual dividend somewhere around the 60-70p mark. You also have the possibility of black swan events i.e. 2017 knocking off $100m from revenue and the fact management has neglected to be transparent about these things until now.

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herbie47 15th Feb 103 of 190
3

In reply to post #448168

They went down to 861p then bounced up to around 920 now falling back. Management have no credibility left, this is just a gamble now. I would rather watch from the sidelines than risking any money.

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JamesrWilson1989 15th Feb 104 of 190
2

Searching Twitter this morning, seems like a couple of anger customers are coming out of the woodwork:

https://twitter.com/davolason123/status/1095454931786584064

This type of press won't help with the churn of new customers.

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UK_Investor_8888 15th Feb 105 of 190
1

This is great for the Shorters though. It actually seems a bit "copy-script", "playbook", and orchestrated (of course, everything is).

If you were Shorting, wanting to close, you'd want the price to go lower - lower.

I'm watching the trades / charts like a hawk. You can see big tranches being sold.

PS: My buy of today is -7%, my over-all, -25%, and yes I feel irritable (going out for a run later). Its realistic to see somewhere in the 800 to 900p band today.

Next downward pressure will be the Ex-Dividend date of Thursday 21st.

So this nightmare (for shareholders) will run for another 7 days at least.

The reckless idiot in me wants to top at 800p but this is so risky.

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UK_Investor_8888 15th Feb 106 of 190

In reply to post #448318

https://twitter.com/davolason123/status/1095454931786584064

This type of press won't help with the churn of new customers.



- Indeed, this is completely unacceptable... of course any financial trading casino of 250,000 users, is going to upset some people. There's probably ten's of thousands of people on that list of unhappy customers.

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JamesrWilson1989 15th Feb 107 of 190
5

You will always find stories to fit your narrative.

I do wish you all the best in Plus500 , I'm not long or short so have no skin in the game. My personal opinion is that it seems the more people dig around Plus500, the more dirt appears. At the moment, you cant trust the figures on Stockopedia as its been highlighted that are inaccurate in their annual reports.

Without reliable figures, then you cant value a business.

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UK_Investor_8888 15th Feb 108 of 190
1


Press Release up:-

https://otp.tools.investis.com/clients/uk/plus500/rns/regulatory-story.aspx?cid=1399&newsid=1234027

"Plus500, a leading online service provider for trading Contracts for Difference ("CFDs") internationally, notes recent press commentary surrounding its annual report and accounts for the year ended 31 December 2017 ("2017 Accounts").

Plus500 confirms that there was a drafting error on page 44 of the 2017 Accounts. The 2017 Accounts state that "In 2017, as in 2016 and 2015, the Company did not generate net revenues or losses from market P&L". The words "or losses" in this statement were included erroneously. Since the publication of the 2017 Accounts, the Company has disclosed in the preliminary results announcement for the year ended 31 December 2018, issued on 12 February 2019, Plus500 suffered a negative revenue impact of $103 million in the 2017 financial year due to strong client trading performance, particularly in the final quarter of that year. Further, the Company confirms that it incurred a negative revenue impact of $19.5 million for the financial year ended 31 December 2016 (2015: $0.0 million).



This error does not impact previously reported revenues, profits or the balance sheet of the Company.



The Company apologises for this error.
"

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AimInvestor85 15th Feb 110 of 190
4

I read that latest RNS as the company just trying to dance its way out of the fact that it has lied about the nature of its revenues. Institutional investors not happy either - two TR1 notifications today showing that JP Morgan and Blackrock have sold down their holdings this week.

It could get very nasty for Plus500 here. Some sort of action by the FCA or Listing Authority feels like a strong possibility. The weekend press will be interesting. The FT and The Times have been reporting on this, and they generally hate the spread betting sector, so they’ll use it as an opportunity.

I retract my comment from my first post above that I could be tempted at sub £10 share price. I wouldn’t touch this now until there is further clarity. I know the PE and dividend yield are tempting now... but if you can’t trust management and / or understand how a company makes money then you’re better off staying well clear.

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