What initially resembled a technical for Plus500 shares has begun to spiral into a bout of aggressive selling for the online CFD and forex broker. Following news earlier this week that Plus500 had enacted new compliance rules that froze trading for many UK customers, shares fell hard from a close of around 700p last week to the 400p level, and found support just above 380p.
Today though, as the 380p level cracked, it triggered another round of selling. As seen in the chart below, once 350p broke, lack of liquidity came into play, with shares rapidly spiking below 300p to a new 52-week low of 227p. Minutes ago, the trading activity led the LSE to temporily suspend trading in Plus500 shares with the stock currently at 275p.
Since beginning its decline, shares of Plus500 have found demand from value oriented fund, Odey Asset Management, which increased its stake in the broker. However, other institutions have been sellers, with accounts controlled by JPMorgan being reported to be sellers during the current move.
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Plus500 has also been the target of research pointing to shares being a sell by Gotham City Research and Cable Car Capital. Negative research has focused on two main facets of Plus500; disenfranchised customers and financial reporting irregularities. As pointed out by Gotham City, the firm was skeptical whether Plus500 would be able to retain UK customers after their accounts were frozen pending the submission of documents. Cable Car Capital also felt that prior filings from Plus500 didn’t add up, with the broker’s UK operations having been stated as composing of 50% of the firm’s revenues not matching data from their 2014 annual report.
How many brokers freeze their clients’ accounts & stay in business? Why would a client stay with such a broker, when it has other options?
— Gotham City Research (@GothamResearch) May 20, 2015