Plus500 Shares Erase Losses, Playtech’s Stock Slides after Deal Fallout

After the termination of the merger agreement between the companies, their share prices have diverged in early London trading

In the aftermath of the termination of the merger agreement between Plus500 (LON:PLUS) and Playtech (LON:PTEC), the share prices of the companies have reacted differently to the news. The stock of the London Stock Exchange’s (LSE) Alternative Investments Market (AIM) listed brokerage traded over 20 percent lower on the day, while the gaming company lost 8 percent at the opening bell.

The price action that followed objectively shows the impact of the deal fallout on the plans of both companies. Plus500 (LON:PLUS) announced in a statement this morning that its operations are not impacted in any way by the announcement made by Playtech this morning.

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At the same time, the brokerage has launched a share buyback program totaling $20 million and also reiterated its dividend distribution policy. Shareholders of Plus500 (LON:PLUS) have been continually benefiting from a relatively high base dividends payout ratio which the company has been employing for a while as 60 percent of retained profits of the brokerage have been returned to shareholders.

Plus500, Playtech, m&a deal
Plus 500 share prices, after Playtech deal cancellation

The company confirmed a $0.2121 per share representing $24.37 million.

Commenting on the matter, a company spokesperson shared with Finance Magnates, ”For us this is business as usual. In the following year our strategy was of an independent firm, despite the discussions with Playtech.”

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The firm has been rolling out additional CFDs products according to the demands of its clients and reiterated a sponsorship deal with football club Atletico Madrid back in June.

While the blowout of the deal doesn’t appear to be materially affecting the share price of the brokerage so far, it is a different story with Playtech (LON:PTEC).

Playtech, Plus500, m&a deal
Playtech (LON:PTEC) Chart, 23 Nov 2015, Source: Google Finance

Apparently some shareholders of the company have been betting on expanding business opportunities for the gaming company. Entering into financial markets has proven to be tougher than expected, as the European regulators, namely the Central Bank of Ireland and now the U.K. FCA, have dented the plans of the group to enter into a brand new market for it.

Since the announcement Playtech’s plans to expand its business line, the company’s share prices have broken to new all-time highs in the anticipation of additional revenues. In addition, the company has raised financing in order to complete the upcoming deals and investors could be selling off stock in anticipation that the gaming company will not be able to find alternative investments.

Shares of Plus500 are trading down by merely 3.5 percent at the time of publication at 346 pence, while those of Playtech are down 8.4 percent to 780 pence per share.

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