CFD broker, Plus500 has announced that its intentions to raise $50 million via an initial public offering (IPO) on AIM, the London Stock Exchange’s market for smaller companies. According to the The Telegraph, Plus500 is aiming for a floated market cap of $225 million. The news comes as brokers have been experiencing a stellar 2013 as volatility has rebounded.
Plus500, which was founded in Israel and is regulated in the UK under the FCA, contrasts to other brokers with roots in the Middle Eastern country as it has focused on branding itself as a CFD provider. As such, offering a proprietary platform, and marketing its UK location, Plus500 is taking the path of London based brokers such as IG and ETX Capital which focus less on forex, and more on their multi-asset, diverse brokerage offering. According to the firm’s website, the most popular trading instruments include the EURUSD, Petropavlovsk, bitcoin (which was launched earlier this year), and Silver. However, similar to other Israeli brokers, Plus500’s business model is heavily based on generating clients through affiliates, using promotions of ‘No deposit required, free bonuses’ to attract new clients.
According to Plus500’s filing, the firm ended 2012 with over 58,000 active customers, which was a 29% increase from 2011. They also announced that for 2012, the firm generated a profit before tax of $23,073,000 on revenues of $56,127,000. Based on estimates of $100-200 revenues per $million traded, the figures calculate to around $20-40 billion in average monthly volumes for 2012. In addition, Plus500 reported Q1 2013 unaudited results of a profit before tax of $6,999,000 on revenues of $19,796,000.
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The broker is led by CEO Gal Haber and Managing Director Alon Gonen. According to the filing, Plus500 aims to use the IPO to increase “awareness and willingness for customers around the world to trade derivative products such as CFDs will offer growth potential to the Group.” In addition, they stated that “net proceeds of the Placing will be used to invest in additional marketing activities to increase brand awareness; penetrate new markets and accelerate growth in existing markets; strengthen the Group’s balance sheet and capital base; give the Group additional flexibility when assessing potential acquisitions; and maintain reserve capital surplus to the Group’s existing mandatory regulatory capital requirements.”
After 2012’s industry contraction, numerous brokers which have been interested in a liquidity event saw their valuations drop. As such, if Plus500 is successful in floating publically, and reaching its target of raising $50 million, the deal will be expected to trigger numerous brokers to attempt an IPO as well. For Plus500, the IPO comes after the broker has been the target of regulators in the past. In 2011, Plus500 was named by the Turkish CMB in its list of brokers that were illegally marketing trading services in the country. In addition, the firm was fined by the UK FSA for failing to provide accurate and timely financial reports to the regulator.
Commenting on the IPO, Gal Haber, CEO of Plus500, stated “the CFD market continues to expand and our planned IPO is the next evolutionary step in our development. We believe that there is a significant opportunity to provide a user friendly and reliable CFD trading platform to retail customers and the Company’s Admission to AIM and Placing will support our growth ambitions.”
Forex Magnates contacted representatives of the broker to learn more about the IPO and its expansion plans. Answering, Gal Haber told us “we are delighted to be seeking admission to the London Stock Exchange’s AIM market. Since being founded in 2008, Plus500 has successfully developed its proprietary, easy-to-use trading platform and we believe that the Group provides a substantial opportunity based around the delivery of a CFD trading platform to retail customers in a growing international CFD market. Our admission to AIM and placing will support our intention to grow our customer base further.”