Plus500 shares plunged over 12 percent today after a Times report on Thursday warned of issues in the company’s financial reporting for 2017. The publication claimed accounting errors stemming from a $103 million loss the company had suffered from client trading activity that year.
The FCA-regulated broker stated that there was a drafting error on page 44 of the 2017 Accounts. The 2017 Accounts state that “In 2017, as in 2016 and 2015, the Company did not generate net revenues or losses from market P&L”. The mention of “losses” in this line turns out to be inaccurate. The company didn’t incur any.
The error is merely technical when it comes to total revenues. Plus500 is the only publicly-listed company that is reporting gains from market making activities and commissions separately.
On February 12, 2019, Plus500 disclosed in the preliminary results announcement for the year ended 31 December 2018 that it suffered a negative revenue impact of $103 million in the 2017 financial year due to strong client trading performance, particularly in the final quarter of that year. Further, the company confirms that it incurred a negative revenue impact of $19.5 million for the financial year ended December 31, 2016 (2015: $0.0 million).
Plus500 shares closed down 12.24 percent at 921.50 pence per share in London, the lowest in 14 months. In August 2018, the stock surged to 2,040.00 pence, the highest level since the Haifa-based firm first sold shares to the public in 2013, as revenue more than tripled amid an explosive interest in its products tied to cryptocurrencies.
The UK-listed CFD trading and spread betting company disclosed in its latest preliminary results for 2018, which were released earlier this week, the negative revenue impact it incurred in 2017 which came “due to strong client trading performance, particularly in the final quarter of that year.”
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“Further, the Company confirms that it incurred a negative revenue impact of $19.5 million for the financial year ended 31 December 2016 (2015: $0.0 million),” the statement concluded.
Weak Outlook for 2019
Plus500 clarified the accounting error claims made by The Times a few days after releasing its yearly earning reports that underlined the pressures on the FCA-regulated Israeli broker.
Plus500 shares lost 30 percent this week, the largest slump since the company froze onboarding on new clients in 2015 as part of a regulatory review into AML controls. Recent share price adjustments resulted from a revenue and profit warning clarifying that the company is downgrading its expectations this year.
Plus500 said in a statement that it expects 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.