Blackrock, the world’s largest asset manager recently acquired a 7.02% stake in Plus500, a CFDs broker. According to a form submitted by Blackrock to the London Stock Exchange, the company has purchased a 4.85% stake in Plus500 through its shares and 2.17% through other financial instruments. The total price tag on this purchase is $160 million. This has been another demonstration of the interest of institutional investors in Plus500, which has had a few rocky months after a period of strong growth. The news of institutional interest is also beneficial for the industry in general and will likely reflect on the performance of brokers like Finq.com and in general, any financial entity that provides access to CFDs & crypto markets.
Institutional investors show interest in Plus500 after the company’s shares drop 30%
Since 2016, Plus500 has shown a large growth. In the last two years before August, the share price of the company has increased by 400%. Sometime in the middle of last month, the trend reversed as Plus500 shed 20% off of its share price. Many analysts attribute the fall to the underwhelming second-quarter reports. Soon after the drop, there was another slump as the founders sold off their 8% stake in the company. The interest of institutional investors is expected to put the company on the path of growth once again.
Odey Asset Management, a London-based investment firm, has been building up its stake in Plus500 for quite some time but its shares fell below 5% this year. In the last couple of weeks, the interest of the company has been reignited as it increased its stake in the CFDs broker to 10%. Axxion, a privately owned investment manager is another company that has taken interest in Plus500 recently. According to the documents released by the London Stock Exchange, Axxion holds a 5% stake in the company. With the recent investment from Blackrock, the institutional investors own about 25% of Plus500’s shares at the moment.
Analysts have different opinions on the future prospects of Plus500
Although the future prospects of the company might look brighter after the investment from the highly esteemed companies, there are some factors that will preclude it from reaching the same level of growth as it experienced the last couple of years. First of all, the boom in cryptocurrencies has attracted many investors to the online brokers. Now that the interest in these assets has died, the activity on the trading platforms might follow suit. Plus500 has benefited a lot from the cryptocurrency frenzy, and many analysts attribute its extraordinary growth to this factor. With the main locomotive of the growth gone, the company will have to find a new way to keep the users interested in its services.
In addition to the declining interest in cryptocurrencies, Plus500 faces other challenges related to regulations. The new regulations issued by the European Securities and Markets Authority limit the leverage that can be used by traders, which will have consequences for the industry. Leverage has been one of the most attractive features of trading, and even though it increases the risks, many prefer to trade with high leverage. The new limitations might disincentivize such traders.
Plus500 had a few bad years but still managed to grow into one of the leaders in the industry
Plus500 was founded exactly ten years ago by six graduates of the Technion – Israel Institute of Technology. The company started to expand its services soon as one year after its operation it added a web platform and a year after that an application for iPhone users. In 2013, the company had its IPO and raised $75 million.
2015 proved a lousy year for the company as the regulatory environment and, particularly, the decision of the UK Financial Conduct Authority to freeze the accounts of Plus500UK’s customers for money laundering concerns caused the price of the company’s shares to drop 60%. The same year, there were talks of Playtech, an online gambling company, acquiring Plus500 for $703 million, but the takeover wasn’t approved by the regulators. The years that followed were extraordinary for the company as the shares increased by 400%. Currently, Plus500 has subsidiaries in UK, Cyprus, Australia, Singapore, and Bulgaria, along with the headquarters in Israel, and makes over $400 million in yearly revenue.