Yahoo Finance Trading platform Plus500's shares crash due to 'surprisingly subdued' markets
Online trading platform Plus500’s (PLUS.L) shares crashed by as much as 40% on Friday after it announced a big drop in revenue.
Plus500, which offers risky trading products to retail investors, said on Friday that its revenue fell by 65% to $53.9m in the first quarter of 2019. The number of active customers also dipped by 4% to 97,921.
Plus500’s share price fell by over 40% in response. By 9.30am, losses had been parred back but the share price was down around 25% on the day.
It means the company’s share price has more than halved so far this year as regulatory changes and weak markets hit business.
The company blamed subdued market activity on the fall in first quarter revenue.
CEO Asaf Elimelech said: “Given the level of global political and economic news, financial markets were surprisingly subdued in the period, which reduced the number of trading opportunities for customers.”
Plus500 offers so-called “contract for differences” to ordinary people, which are risky leveraged bets on the short-term movements of share and asset prices.
Elimelech said: “While revenue in the quarter was disappointing, we have much to be encouraged about. Plus500 continued to lead the industry in new customer acquisition, both in absolute numbers and in the efficiency of the marketing spend.”
The number of new customers signed up in the first quarter rose by 10% quarter-on-quarter to 21,306, while the average user acquisition cost fell by 17% to $1,230.
Friday’s share price decline is the second significant share price drop for Plus500 so far this year. Shares fell by 35% in February after it warned that new rules from the European Securities and Markets Authority (ESMA) limiting the amount of leverage that can be given to retail customers would mean profit would be “materially lower than current market expectations” this year. Revenue is also expected to fall.
Elimelech said on Friday: “Given recent regulatory changes, it is imperative to attract, engage and retain valuable customers and the Company is working on a number of initiatives to extend its reach and further improve the customer experience and the service offered."
Plus500 is diversifying its revenues away from Europe as a result of the regulatory changes. Revenue from outside the European Economic Area represented 54% of turnover in the first quarter, compared to 40% in the final quarter of 2018.