Odey Asset Management, the London-based hedge fund run by Crispin Odey, increased its stake in Plus500 Ltd. after the retail trading platform lost nearly one-third of its value this week as it expects a material operational and financial impact from ESMA’s new regulations.
According to a regulatory filing from the London Stock Exchange, Odey bought about 2.5 million in ordinary shares, while unloading 1.2 million CFDs, bringing its overall stake in the company to nearly 14.8 million shares or 13.05 percent, up from 9.74 percent before the last transactions. At today’s closing price of £11.16, the last deal is valued at £42.0 million, while Odey’s stake is worth nearly £165.67 million.
The hedge fund offloaded nearly one percent of its investment in Plus500 last week just ahead of the company’s earnings announcement.
Plus500 plunged 30 percent this week, the largest slump since it froze operations in 2015 as part of a regulatory review into AML controls after the company warned on Tuesday that its revenue and profit would fall short of analysts’ expectations this year.
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The ESMA’s new regulations also hit the shares of other British brokers hard, with shares of IG Group and CMC Markets falling by over five percent. Shares of IG fell over 12 percent last month after the spread better reported a 17 percent slump in first-half earnings.
Vote of confidence
The vote of confidence from Odey comes as panicked investors have raised questions about Plus500’s business future after the company said new regulations would make it harder for some clients to use its trading platforms. The European regulators said they acted due to an increase in the number of firms in the CFD market, citing its concerns over customers not properly understanding this particular product.
Odey has invested in Plus500 since disclosing a stake in the company in August 2015 and has now raised its holding twice since the fund began rebuilding its stake in the Israel-based but London-listed broker last year.
Plus500 said yesterday in a statement that it expects a material operational and financial impact from the new rules limiting the amount of leverage it can offer to retail clients, which means that revenue and profit would be “materially lower than current market expectations” in 2019.
Plus500’s warning on this year’s earnings took the shine off its solid results for 2018 where it doubled core profit to $506 million and full-year revenue to $720.4 million.