My last blog post mentioned my brief holding in Petrofac. Another company I held briefly was Plus500 (PLUS). Yesterday its share price dropped over 30% following a profit warning in a preliminary results announcement. The cause is simply that tightening regulations are impacting revenue.
Plus500 is big CFD provider. That fact that most “investors” in CFDs lose money is widely acknowledged and the Financial Conduct Authority (FCA) and EU regulators have been tightening up on the rules that apply to Contracts for Difference. The reality is that most such “investors” are ill-informed speculators.
The FT said today that the announcement was most revealing as it showed “for the first time how much its earnings relied on betting against its customers”. Columnist Lex also described it as a “risky business” and that is one reason I sold the shares and have not considered reinvesting since. There are some companies that are simply too dubious to hold – rather like Petrofac, particularly if you also have ethical qualms about how they operate.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
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One thought on “Plus500 Share Price Dive and Betting Against Your Customers”
It seems the PLUS500 2017 accounts were misleading. This is what the company said yesterday: “Plus500 confirms that there was a drafting error on page 44 of the 2017 Accounts. The 2017 Accounts state that ‘In 2017, as in 2016 and 2015, the Company did not generate net revenues or losses from market P&L’. The words “or losses” in this statement were included erroneously”. Dubious accounts from a dubious company. The share price fell another 12% yesterday.