Odey Asset Management Continues to Raise Stake in Plus500, Shares Dive 5%

Plus500's share price went into free fall last week after the UK regulator launched a surprise clampdown on CFDs firms.

Odey Asset Management, the London-based hedge fund run by Crispin Odey, increased its stake in Plus500 Ltd. for the third time in December after the retail trading platform lost nearly one-third of its value last week in the wake of a crackdown by the FCA on firms selling CFDs to retail customers.

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According to a regulatory filing from the London Stock Exchange, Odey bought about 764,608 million in ordinary shares, whilst unloading 31,053 CFDs, bringing its overall stake in the company to about 26,482,409 shares or 23.05 percent. At yesterday’s closing price of £3.60 the last deal is valued at £2.64 million ($3.35 million), while Odey’s stake is worth nearly £95.3 million ($121.13 million). That makes it the largest shareholder in Plus500, easily surpassing co-founder Alon Gonen, who holds nearly 10 percent.

Plus500 plunged 29 percent last week, the largest slump since it froze operations as part of a regulatory review into anti-money-laundering controls, after the UK FCA launched a surprise clampdown on the firms offering contracts for difference. The FCA’s move also hit the shares of other British brokers hard, with IG Group seeing the worst after its shares fell 38% to its lowest levels since 2013. CMC’s market value also shed $260 million, with its share price now at less than half of the firm’s IPO earlier this year.

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Vote of confidence

The vote of confidence from Odey comes as panicked investors have raised questions about Plus500’s business future after the British watchdog said eight in ten customers, or 420,000 people, were losing money, and vowed to better protect them. The FCA added that it 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 Asset Management held a 19% stake in Plus500 prior to the latest developments but has been buying shares since the price collapsed, probably on the hopes of a rebound. Much of its stake was bought below the £4 share level.

Odey has invested in Plus500 since disclosing a stake in the company in August 2015, and has now raised its holding twice since the CFD provider’s shares wiped out more than £170 million of their value last week.

Last week Plus500 said in a statement that it expects material operational and financial impact on the UK regulated subsidiary of the firm, which represents approximately 20% of the group’s revenues. The CEO of Stater Global Markets, Ramy Soliman, was quoted saying that the FCA is doing the right thing.

“The larger well capitalized players that operate prudent business models with strong risk management and good education programs will be adversely affected in the short term but in the longer term these firms will ultimately increase their market share in a more consolidated space. For the smaller retail firms that warehouse client risk, a natural consequence may be more externalization of their flows as they may not have enough capital or the correct business model to both market to new clients and manage risk books,” Ramy commented.

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