Shareholders in trading platform Plus500 (LSE:PLUS) have been hit hard again as the firm reported revenues have fallen by 65pc compared with the previous quarter. Shares were down over 40% in early trading on Friday touching 400p, after the release of a quarterly trading statement from the company.
Investors have barely caught their breath since the last debacle in February when Plus500 confirmed press reports of an error in its annual report. That bombshell saw the stock plummet from 2019 highs of over 1650p to just 695p over the space of one week.
Chief Executive Officer, Asaf Elimelech blames market conditions for the drop off in revenue saying: “Given the level of global political and economic news, financial markets were surprisingly subdued in the period, which reduced the number of trading opportunities for customers.”
However, revenues have declined dramatically when compared with the same period last year. Company revenue in the first quarter of 2018 was $297.3m, nearly six times that if this year’s comparable period.
Spread-betting and contract-for-difference trading platforms have been struggling with ever-tightening rules designed to protect retail investors. Generally, the sector faces headwinds due to the fact that the majority of its clients’ will lose money, with many throwing in the towel altogether. Stated figures of the percentage of clients who lose money varies across the industry but most fall in the 70-80pc bracket. With such a churn of customer base, companies need to spend significant amounts on advertising, and regulations have ensured adverts disclose the hard facts that using the services are high risk.
The average cost for Plus500 to acquire each user has increased substantially compared with last year. In Q1 2019 the cost was $1230 per user compared with $502 a year ago – this is however down from $1489 In Q4 2018. The Friday’s update the firm highlighted that new customer acquisition ‘held up well’ with 21,306 new customers acquired on the first quarter of the year, a 10pc increase on the previous quarter.
The company has been repurchasing its shares over the past few months and reports at the end of March it had bought $7.8m of the previously announced $10m buyback programme. This has done little to stem the sell off of the stock over the past nine months since it hit an all-time high of 2076p.