Online CFDs and spread betting broker Plus500 saw its share price crash fall 30.7% yesterday after the company issued an unexpected profit warning just 2 months after reassuring investors regulatory changes would not hit its bottom line.
The about turn in forward guidance comes against the backdrop of the company’s founders selling worth a total of £260 million over less than a year. £31.1 million in shares were sold by one of the founders in December, after markets had been informed by Plus500 that it didn’t expect regulatory changes by the European Securities and Markets Authority to impact on 2019 profits.
Just after the changes to regulation came into force in August, IG Group, a larger peer of Plus500 also listed on the main London Stock Exchange and a FTSE 250 constituent, told markets they would impact its profits. This was repeated in December while Plus500 held firm with its ‘business as normal’ message. That position has now been changed with the company admitting that 2019 profits are after all expected to be hit and forward guidance they would be ‘materially lower’ than current analyst forecasts issued.
Despite a 90% jump in 2018 profits and 65% revenue growth being reported, the Plus500 share price plummeted by 500p to £11.33 a share following the announcement. That translated into a £570 million drop in value.
Plus500 started life as a public company on the Aim exchange in 2013 before last year being promoted to the London Stock Exchange proper. Having originally floated at 115p a share, early investors in the company have made a significant profit despite yesterday’s share price slump. However, market observers believe that Plus500’s failure to update investors on the deteriorating forward outlook for 2019 in either November or December will have significantly eroded trust in the company’s management and corporate governance.
In November chief executive Asaf Elimelech told markets that the company was “in a good position for 2019”. In December he said that Plus500 “continued to perform well” despite the new regulations which limited the amount of leverage that can be offered to retail traders. When yesterday asked by The Times newspaper if he agreed that Plus500 shareholders had been misled by those statements, he denied the accusation, responding:
“Definitely not. We have been transparent all along”.