Good morning,

Thanks for all the kind comments to start off the day - much appreciated!

The main things on my mind today are Plus500 (LON:PLUS), Games Workshop (LON:GAW) and Bonmarche Holdings (LON:BON).

Plus500 (LON:PLUS)

  • Share price: 530p (-26%)
  • No. of shares: 113 million
  • Market cap: £601 million ($790 million)

Q1 2019 Trading update

It's going to be difficult for me to avoid a triumphant tone with this one, as I have been very critical of its business model, and how it presents its results.

  • See the Stocko archives for all the SCVR comments by Paul and I over the past year.
  • See my original description of Plus500 as a bucket shop that profits directly from client losses.
  • See my follow-up article discussing various elements of its business practices
  • See my subsequent article after it was finally revealed how much customer P&L it was exposed to.

The bottom line is that it didn't explain properly how much customer P&L it was exposed to.

This customer P&L exposure makes its results inherently volatile. It is incentivised for its clients to lose money, but its clients can enjoy unlimited upside when their bets go the right way.

In 2017, for example, Plus500 lost $103 million to customer profits. Then in 2018, it made $172 million from client losses. This is possible because it doesn't run a comprehensive hedging program like other CFD providers do (its competitors do have some customer P&L exposure, but it is much smaller).

Another key element of this story is that Plus500's marketing efforts target the least knowledgeable beginners, who tend to waste their accounts quickly and then give up.

This is problematic when it comes to the EU's ESMA regulations, which are designed to protect amateur traders from using too much leverage. Last year, Plus500 bullishly claimed that 12% of its European customers "may be eligible" for professional accounts, and that these accounts were responsible for 75% of its revenues.

Today's update

Today we learn that Q1 2019 revenues (to March) have collapsed by 65% quarter-on-quarter, to just $54 million. It would have been $82 million, except for $28 million of client profits eating into the result. 

The quarter-on-quarter…

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