The company disclosed a loss of $103 million during the crypto boom in the final quarter of 2017
The confidence of Plus500 investors appears to have been shattered significantly. A week after the company reported a downgrade to its outlook for 2019, the company’s stock continues to slide. The main reason is a previously undisclosed market making loss, that doesn't affect top or bottom line results.
While the financial results of the company for 2018 have been all but solid, it was the fine print that caused investors to sell their holdings. In the following lines, we are briefly exposing what really happened. The information has been verified by sources with knowledge of the matter within the company.
After a report by The Times, last Friday focused onto a drafting error in the firm’s annual report for 2017, shares of the company continued a 30% slide with another leg lower to lose 57% since the close on February 11th, just before the firm’s earnings report was published.
Crypto Boom Market Making
While no changes have been reported to the bottom line of Plus500, the firm didn’t disclose a loss in market making activities in Q4 of 2017. At the time many brokers in the industry have suffered heavy losses from trading Cryptocurrencies. The traditional adagio that retail investors always lose didn’t play out well during the crypto boom.
Investors who got into trading Bitcoin early enough posted significant gains on their accounts. That said, in all likelihood, those have merely been paper profits. As the prices of cryptocurrencies dropped lower in the first quarter of 2018, Plus500 reported a record-breaking quarter.
The company reported a market-making loss of $103 million, most of which occurred during the crypto boom. Over 2018, the P & L was offset, netting a gain of $172 million. During both 2017 and 2018, revenues and profits of Plus500 have not been misrepresented in any way.
While the bottom line hasn’t been affected, investors are worried that the company didn’t adequately disclose its crypto market making losses to investors in Q4 2017. Other companies such as Playtech, which cashed out on its Plus500 holdings in September 2018 reported similar misfortunes in crypto market making.
Crypto Trading Challenge
While Plus500 did manage to onboard a slew of crypto traders, aside from a few exceptions its peers in the industry, traditional Forex and CFDs brokers largely underperformed. Taking on all the risk has not been particularly appealing to most companies with significant experience in the market.
Until December 2017, when the futures contract got introduced, there were no known hedge mechanisms to protect brokers from the market exposure of its clients. At the time IG Group was revealed as one of the major holders of Bitcoin futures contracts, protecting the company from exposure to client gains.
The market eventually turned, and Plus500 made those losses back and then some. The broker reported a record-breaking quarter in Q1 2018, which was primarily driven by those same crypto investors who didn’t take their winnings and by new accounts which bought into the digital asset boom at the top.
Thinking about Short Sellers
The massive crypto losses of the company which didn’t get disclosed ultimately didn’t matter to the firm or its long-term investors. But it did a lot of damage to short sellers. At the end of the fourth quarter, the brokerage’s shares were trading above current levels, circa 900 pence per share and hit an all-time high of 2000 pence per share in August.
At present, Plus500’s premium over other publicly-traded retail brokers has all but evaporated as the market comes to terms with the missing details in its Q4 2017 reports. The crypto market-making position on which Plus500 was down significantly, turned for the best possible outcome due to the sharp fall of Bitcoin throughout 2018.
One of the big shareholders of the Haifa-headquartered brokerage, however, does not appear to be deterred by the latest events. Crispin Odey’s fund Odey Asset Management just ramped up its stake in Plus500 to above 16%. While attractive at current valuations, legal challenges could still be ahead for the firm.
For the time being, Plus500’s stock is the worst performing stock on the FTSE 250 index this year. The company got accepted into the elite list of constituents in one of the largest UK indices only last year.
The confidence of Plus500 investors appears to have been shattered significantly. A week after the company reported a downgrade to its outlook for 2019, the company’s stock continues to slide. The main reason is a previously undisclosed market making loss, that doesn't affect top or bottom line results.
While the financial results of the company for 2018 have been all but solid, it was the fine print that caused investors to sell their holdings. In the following lines, we are briefly exposing what really happened. The information has been verified by sources with knowledge of the matter within the company.
After a report by The Times, last Friday focused onto a drafting error in the firm’s annual report for 2017, shares of the company continued a 30% slide with another leg lower to lose 57% since the close on February 11th, just before the firm’s earnings report was published.
Crypto Boom Market Making
While no changes have been reported to the bottom line of Plus500, the firm didn’t disclose a loss in market making activities in Q4 of 2017. At the time many brokers in the industry have suffered heavy losses from trading Cryptocurrencies. The traditional adagio that retail investors always lose didn’t play out well during the crypto boom.
Investors who got into trading Bitcoin early enough posted significant gains on their accounts. That said, in all likelihood, those have merely been paper profits. As the prices of cryptocurrencies dropped lower in the first quarter of 2018, Plus500 reported a record-breaking quarter.
The company reported a market-making loss of $103 million, most of which occurred during the crypto boom. Over 2018, the P & L was offset, netting a gain of $172 million. During both 2017 and 2018, revenues and profits of Plus500 have not been misrepresented in any way.
While the bottom line hasn’t been affected, investors are worried that the company didn’t adequately disclose its crypto market making losses to investors in Q4 2017. Other companies such as Playtech, which cashed out on its Plus500 holdings in September 2018 reported similar misfortunes in crypto market making.
Crypto Trading Challenge
While Plus500 did manage to onboard a slew of crypto traders, aside from a few exceptions its peers in the industry, traditional Forex and CFDs brokers largely underperformed. Taking on all the risk has not been particularly appealing to most companies with significant experience in the market.
Until December 2017, when the futures contract got introduced, there were no known hedge mechanisms to protect brokers from the market exposure of its clients. At the time IG Group was revealed as one of the major holders of Bitcoin futures contracts, protecting the company from exposure to client gains.
The market eventually turned, and Plus500 made those losses back and then some. The broker reported a record-breaking quarter in Q1 2018, which was primarily driven by those same crypto investors who didn’t take their winnings and by new accounts which bought into the digital asset boom at the top.
Thinking about Short Sellers
The massive crypto losses of the company which didn’t get disclosed ultimately didn’t matter to the firm or its long-term investors. But it did a lot of damage to short sellers. At the end of the fourth quarter, the brokerage’s shares were trading above current levels, circa 900 pence per share and hit an all-time high of 2000 pence per share in August.
At present, Plus500’s premium over other publicly-traded retail brokers has all but evaporated as the market comes to terms with the missing details in its Q4 2017 reports. The crypto market-making position on which Plus500 was down significantly, turned for the best possible outcome due to the sharp fall of Bitcoin throughout 2018.
One of the big shareholders of the Haifa-headquartered brokerage, however, does not appear to be deterred by the latest events. Crispin Odey’s fund Odey Asset Management just ramped up its stake in Plus500 to above 16%. While attractive at current valuations, legal challenges could still be ahead for the firm.
For the time being, Plus500’s stock is the worst performing stock on the FTSE 250 index this year. The company got accepted into the elite list of constituents in one of the largest UK indices only last year.
58% of UK Investors Choose Professional Guidance over 'Finfluencers’
Network, Learn, Grow | FMAS:24
Network, Learn, Grow | FMAS:24
Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
Don't miss out on this 5-second invite packed with energy and urgency!
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
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Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
Don't miss out on this 5-second invite packed with energy and urgency!
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
📣 Stay updated with the latest in finance and trading!
Follow FMevents across our social media platforms for news, insights, and event updates. Connect with us today:
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Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
📣 Stay updated with the latest in finance and trading!
Follow FMevents across our social media platforms for news, insights, and event updates. Connect with us today:
🔗 LinkedIn: https://www.linkedin.com/showcase/financemagnates-events/
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Don't miss out on our latest videos, interviews, and event coverage. Subscribe to our YouTube channel for more!
Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
📣 Stay updated with the latest in finance and trading!
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Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Looking to expand your network in #Africa? Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
📣 Stay updated with the latest in finance and trading!
Follow Finance Magnates for news, insights, and event updates across our social media platforms. Connect with us today:
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Looking to expand your network in #Africa? Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
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Follow Finance Magnates for news, insights, and event updates across our social media platforms. Connect with us today:
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Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Looking to expand your network in #Africa?
Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
Looking to expand your network in #Africa?
Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
This content is provided solely for general informational purposes and should not be construed as financial product advice or an investment recommendation. It has been prepared without considering your personal circumstances.
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Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
This content is provided solely for general informational purposes and should not be construed as financial product advice or an investment recommendation. It has been prepared without considering your personal circumstances.
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