Plus 500 could it be a minus?

Sunday, Jan 13 2019 by
12

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
730p
Change
-1.9%
Mkt Cap (£m)
835.4
P/E (fwd)
6.2
Yield (fwd)
9.3



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190 Posts on this Thread show/hide all

wilkonz 19th Feb 131 of 190
4

In reply to post #449673

'And always diversify so that no one stock is more than about 5% of your portfolio.'

This is excellent advice Nick. Last year I lost money on Conviviality - in fact I lost everything as it went bust before I could react. Last week I lost 36% on Titon Holdings (LON:TON) as well as 32% on Plus500 (LON:PLUS) the week before. Although these losses were painful, they were not disastrous as I was reasonably well diversified. One of the great advantages of being diversified is that it gives one the courage to cut losses quickly rather than hang on in the hope things will get better. If there are any positives to take away from the Plus500 (LON:PLUS) fiasco it is that it has been a useful, if uncomfortable, learning experience.

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Blissgull 19th Feb 132 of 190
2

"One of the great advantages of being diversified is that it gives one the courage to cut losses quickly rather than hang on in the hope things will get better."

Wilkonz, good post, and 100% agreement from me on this point. One of the biggest benefits of diversification is psychological. It's much easier to behave rationally when your investment in a share is small. When you concentrate your money in too few companies it is easy to become emotionally involved. My biggest losses have come when I have had large holdings and have been tempted to average down rather than get out quick. Keeping each holding small through diversification helps to avoid this destructive tendency.

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AimInvestor85 19th Feb 133 of 190
1

Great posts above.

There’s always a limit as to what a set of data can tell you. I have no idea how you can measure whether management lie as a metric - doesn’t feel like you can. Metrics mentioned above about social mobility and CO2 emissions are all garbage. They’re pure PR dross that don’t mean anything. Bear in mind that (1) company directors signed off revenue figures without disclosing how it’s actually made, and (2) the auditors seemingly don’t understand the company well enough to pick up on it. Therefore do you really think that any metrics around ethics will be reliable? No chance.

I do agree that it would be handy to have the short interest in stocks in the Stockopedia data. At one point short interest was well over 10% (can’t recall the exact figure), which is a big red flag.

Sentiment is fully against Plus500 at the moment. Institutional investors in particular don’t take kindly to be lied to about how a business makes money. Management credibility is shot to pieces and as I type the share price is down another 7% today. The stock goes ex-divi on Friday as well.

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UK_Investor_8888 19th Feb 134 of 190

Wise words above!

I realise my mistake, as you've helpfully shown: Too big a stake, making it psychologically difficult to withdraw.

My sum of loss is huge - but the percentage loss isn't. My plan at the moment is to let it hit the crash base:-

Where will it crash to? 385 to 585 perhaps.

The Shorters have 5,593,905 to sell. If I were them, I would be expecting the decline to continue beyond Friday using the Ex-Dividend date.

The question then, supposing it hits 385, is can it recover?



Also: Odey has raised his stake from 14.55 to 16.19% today.

I'd say Odey is making the most of this crisis.

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gus 1065 19th Feb 135 of 190
5

On the subject of red flags, two clicks on the Plus500 (LON:PLUS) Stock Report page to “Accounts” and “Directors Dealings” would have given roughly 177 million reasons (the aggregate value of stock sold by the directors despite regular profit upgrade releases since last August) to consider where the smart money was going on this one ... maybe once the tide turns and they start buying that might indicate a bottom is being reached.

Gus.

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herbie47 19th Feb 136 of 190
1

In reply to post #449818

Why not sell now and then buy back in when/if the shares price starts to rise?

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Snoo 19th Feb 137 of 190
1

If there was any crumb of comfort I think the troubles that PLUS are suffering has no real impact on their target markets, most of whom are not serious (I have an account and did some trades, only to see what it was like).

So while what has happened is a bit of a scandal for investors, for the actual users of the site I don't think it'll affect them too much. The only real question being will they run out of users. The new regulations now ban bonus incentives, which I think would have been really effective due to the opaque nature of them. (EToro are along similar lines, they must have gotten loads of money from mugs in the past).

Their valuation seems incredibly cheap at the moment I have to say. But to invest now you'd have to go through a lot of red lines, ie heavy insider selling, bad trading update, falling knife share price, high short interest

If you wouldn't buy it today at the current price, why hold it at the current price? Quite difficult to persuade yourself once you have invested, I know.

If it does go as low as 385 I'd probably have to buy some out of interest. A bigger problem would be if they were in hot water with the authorities, which I do not believe they are. The problem here could be fixed by a few better communications and making some heads roll at the top and replacing them with some more investor-friendly faces. Whether they want to do that I don't know.

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UK_Investor_8888 19th Feb 138 of 190
1

Its difficult to judge the bottom, isn't it!

As a rule of thumb, the markets will do the opposite of what I do!

My view is hold, take the Dividend, currently 36% down, 585p puts me 51% down, 385p put me 68% down.

If those scenarios are reached, and it looks likely, then one can top up, if there is an investment case, with an equal sum of capital.

There are some, if false, arguments and metrics that says the share is already fair value (with a scandalous management accepted).

The Short Sellers percentage is still dropping daily. Today's rate of freefall is only half yesterdays!

I really don't know!

I recognise my mistake in this though, and shame on me.

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AimInvestor85 19th Feb 139 of 190
5

The bull case with Plus500 is that they often have dramatic pullbacks in the share price, and it recovers. That fails to understand what’s going on for each occasion, and there’s lots of question marks hanging over it now.

The new EU rules are biting. If you look at their investor webpage you find this helpful chart showing new customers. There was the huge crypto fuelled boom in late 2017 / early 2018, but now new customer numbers are back to 2015 levels.
https://www.plus500.com/Investors/KPIs

In case you’re wondering what these bonus offers they are no longer allowed to do are, here’s the link to their Australia site (they are still allowed outside of the EU). Basically, it’s a “deposit $x and receive a bonus of $x should you trade a certain number of times” type offer. Very similar to what the online gambling operators do. That tells you the sort of clientele it probably attracts - very high churn.
https://www.plus500.com.au/promotions/bonus

There’s also the new leverage restrictions which make it less attractive for punters to trade on leverage. Plus500 have few professional clients than the likes of CMC or IG, so they must be struggling to sell their product to the mass market audience.

I have no idea how to value this now that we don’t know the extent of any client losses driving their revenues. But if I look back to 2015 - the last time they were recruiting new customers at their current run rate - then net profit that year was $96m (say £75m). Current enterprise value is £516m (I’m using Stockopedia figures here), so that gives a current P/E of around 7. Is that enticing enough for you? I’ll sit on the sidelines until there’s some sign of stability and clarity

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aflash 19th Feb 140 of 190
4

In reply to post #449908

Let me remind you, because no-one else has.

1) Shorters are Responsible for dividends.
2) By holding until Friday you will receive a stonking dividend payment.

All those clever traders with your shares on loan have to pay out.
Some of them will want to cover to avoid that.

From whatever the low price it reaches today it is likely to stay stable or rise tomorrow.

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AimInvestor85 19th Feb 141 of 190
2

aflash, just to check I understand what you’re saying.

If you are shorting a stock, you are responsible for paying the dividend to the lender of it (essentially reimbursing them for their “lost” dividend). So those who are short are therefore likely to close their position before the ex-divi date on Friday so that they don’t have to pay it? Got it.

Although the announced dividend was $0.62 per share, or c£0.47. The share price is down £0.85 so far today, and fell a similar amount yesterday. So for your theory to hold true, those shorters will all need to think that the share price won’t fall by more than £0.47. At the current knife falling rate, I wouldn’t be so sure.

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UK_Investor_8888 19th Feb 142 of 190
1

Crashed below 700... but we know this is possible... 385 to 585 next.

Beware that Israeli Withholding Tax issue swaging 30% for The State. I'm going to waste half a day of my life filling out the forms in due course.

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UK_Investor_8888 19th Feb 143 of 190

The Short Seller % has dropped by a tiny % to 4.79.

The bad news is BlueDrive Global Investors LLP have slightly upped their short by 0.18%.

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



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aflash 20th Feb 144 of 190
1

In reply to post #450033

At the current knife falling rate, I wouldn’t be so sure.

OK Let us say you are right, then what is the 'current knife falling rate'?.

Last Tuesday, Day of the warning there was 208p between Hi and Lo. Not surprising.

Day 2 Wed 86p between Hi and Lo.

Day 3 Thurs 99p between Hi and Lo.

Day 4 Fri 183p between Hi and Lo.

Day 5 Mon 133p between Hi and Lo.

Day 6 Tues 123p between Hi and Lo.

Most days the High was near the open and the Low near the close but not today.

There was a spike to near 770p mid-morning.

So? Some bulls who ran out of steam or some short coverers.

Various ways to crunch the numbers. An average of the daily loss would take us down to the 570s from the Low/Close area.

With a dividend thrown in. Interesting.

That level has also provided support in the spring and autumn of 2014, 2015, 2016.

According to my original thesis then the 47p of dividend responsability would encourage shorters to cover from today's low of 693p - 47p = 646p.

Any buyer should either dump the shares on Thursday when it trades ex-div and hope the dividend payment covers the loss or save a lot of ammunition for later.

What 888 tells us about reclaiming Israeli tax leads me to aim to buy on any crash and sell on any spike the same day (Wednesday).

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UK_Investor_8888 20th Feb 145 of 190

Oh God please fall only to 646p! That's only a 46% haircut for me. :-)

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wilkonz 20th Feb 146 of 190

If I were still a holder in Plus500 (LON:PLUS) I'd be asking myself three questions:

1. Is the share price likely to fall further?

2. If they do fall further, at what level would I sell the lot?

3. If I do sell and they fall further, at what level would I buy them back?

In the hypothetical situation of selling a share and watching the price fall by 20% it is possible to persuade oneself that one has made a 20% profit on the transaction which can be set against the overall loss.

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Ramridge 20th Feb 147 of 190
3

In reply to post #450238

wilkonz -
I think you are missing the elephant in the room.
Question : Is this a fraud that is rapidly unravelling in front of your eyes?
If you answer yes, then everything else is academic. The value of the company is zero.

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john652 20th Feb 148 of 190
4

On my recent theme of director holdings, and no director is buying Plus500 right now....

If I was a director and the firm was solvent & just suffering market noise, I wouldn’t give two hoots if it fell further because I could lock in 17% dividend !!! If it fell I’d buy more, it’s my company, it’s safe.

- wow 17% wouldn’t you? No, oh, why’s that then?

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wilkonz 20th Feb 149 of 190
3

In reply to post #450273

Ramridge.
No I'm not missing the elephant in the room. And I share your view that these shares might be heading fast towards zero. Especially if there are more 'typos' in the pipeline. The purpose of my post was to suggest as delicately as possible that anyone still holding these shares might consider the option of selling before the inevitable happens,

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UK_Investor_8888 20th Feb 150 of 190

https://www.stockopedia.com/valuation/NNWC/?ticker=LON:PLUS

Plus500 as valued by the NNWC Valuation Technique

179


https://www.stockopedia.com/valuation/NCAV/?ticker=LON:PLUS

Plus500 as valued by the Net Current Asset Valuation Technique

188



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