Plus500 Quarterly Revenue Declined Due to New Leverage Rules

  • Apr 12, 2019 BST
  • Team Kalkine
Plus500 Quarterly Revenue Declined Due to New Leverage Rules

Plus500 Ltd (PLUS) is an Israel based provider of CFDs (Contracts for Difference). The Company innovate trading technology and operates an online trading platform for shares, forex, commodities, ETFs, options and indices for retail customers. It has the number 1 CFD trading platform in the UK, Germany, Spain and Australia. The Company conducts operations in the geographic area of Europe, Australia, Gibraltar, Australia, Asia and the Middle East. Its subsidiaries are in the UK(Plus500UK), Cyprus (Plus500CY), Australia (Plus500AU), Singapore (Plus500SG) and Bulgaria (Plus500BG).

The company posted low revenue for the last quarter due to lower market volatility and clampdown in Europe on high leverage betting. This is also hurting the retail brokers as well. There was a new law passed a year ago to reduce the leverage and protect the amateur investors from high losses. The effects of new rules can be seen now from the results of companies dealing in CFDs such as Plus500 and its industry peers like CMC markets and IG.

Due to platform issue, the cryptocurrency market also collapsed which was in full form at the start of the year 2018. The bitcoin was trading nearly at $5,000 from its highs of $20,000.

The revenue of Plus500 came down to $53.9 million in the first quarter of the current financial year against last year data of $297.3 million. The declined revenue resulted in fall of share price to 399.7 pence which were nearly 43 per cent from last day price. The shares of its peers were also trading 5 per cent lower against the previous day closing.

Share Price Performance

Daily Chart as at April-12-19, after the market closed (Source: Thomson Reuters)

On 12th April 2019 (after the market closed), Plus500 Ltd. shares ended at GBX 495, down by 31.12 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 2,076.00/GBX 693.50. The outstanding market capitalisation was around £561.17 million with a dividend yield of 21.28 per cent.

As stated by one of the brokers, the company had a tough quarter and have reduced its forecasted full-year profit by a third.

Last year, European regulatory agencies put restrictions on the sale of CFD’s, which will allow investors to bet on the assets prices without holding the asset. The agencies also cut the leverage limit for retail clients on an opening of position to 2:1 from 30:1, this will restrict them to make money from a single trade and will also protect them from heavy losses as well.

The company stressed the impact created by the fall in volatility in its released statement. Its main emphasis was on the restriction put on leverage limit from which the investor makes money.

As per Asaf Elimelech, Chief executive at Plus500, the news related to global politics and economy makes the financial markets soft and will gradually reduce the number of trading opportunities for the investors. According to the majority of trader, the new leverage rule is the main reason which led to a decrease in customers and trading. Plus500 have seen a decline to 97,921 customers in the first quarter as against 218,187 active customers data from last year.

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