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UPDATE - Plus 500 shares advance as it works ‘full speed’ to unlock accounts

Published: 21:28 27 May 2015 AEST

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Analysts see “significant uncertainties” for Plus 500

--ADDS BACKGROUND--

Shares in Plus 500 (LON:PLUS) advanced on Wednesday after it told investors it is working at ‘full speed’ to re-approve all customer accounts.

Today’s slight rebound, however, still leaves the AIM share some 60% lower than just two weeks ago when it emerged that client money laundering checking procedures had been inadequate.

The forex focussed CFD firm had to freeze more than half its accounts and today, it revealed it will take about a month to work through the backlog to reprocess the customers.

At the same time changes to the new client ‘on-boarding’ process, to prevent further problems, may also take about one month to implement.

Plus 500 revealed also that revenue, at US$107.9mln, for the year to date now exceeds the total generated for the whole of the preceding year. It did, however, warn that the second quarter of the year is typically quieter and it expects its financial performance will be affected by its recent problems.

Some US$4mln of lost revenues are already estimated for the past two weeks alone, and Plus 500 said it is not possible to accurately estimate the ultimate impact on annual revenues. The short cost of remedial actions has, meanwhile, been estimated conservatively at US$2mln.

Analysts at Liberum Capital, which is also Plus 500’s AIM nominated advisor, repeated a ‘buy’ recommendation and suggested a ‘fair value’ of between 390p and 480p for the share (, though it expects trading to remain volatile.

“Today's statement does not provide any information on the number of accounts which were frozen or the number which have been unfrozen during the remediation plan,” said Liberum analyst Cormac Leech.

“There is also no information on the behaviour of customers after their accounts have been unfrozen (although it is perhaps too soon post the event for this data to be meaningful). 

“We believe this information will be key to developing meaningful financial forecasts for the group.”

Numis analyst Jonathan Goslin, meanwhile, highlighted there are “significant uncertainties” such as the proportion of clients can ultimately be verified, how the FCA may react, and the level of reputational damage to the business.

The broker currently has both its recommendation and price target ‘under review’.

Aside from the current crisis involving the frozen accounts and Plus 500’s anti-money laundering processes, the company has also been targeted by short-selling US hedge fund Cable Car and was recently criticised in the Financial Times Alphaville column.

Plus 500, which holds its AGM today, also used the statement to reject “recent press and blog commentary” and describes their assertions as “misrepresentative and baseless.”

“The board reiterates that the company's accounts, along with those of its subsidiary, Plus500UK Limited, have received unqualified audit opinions from PwC and the directors are comfortable with the disclosures made therein,” the company said in a statement.

Plus 500’s AIM shares, up around 6% today,  appear to have found some support following reports that US hedge fund manager Crispin Odey, who runs Odey Asset Management, had been buying in the market.

Some 2.5mln Plus 500 shares were bought by Odey on Friday, according to a filing on Tuesday, and as a result the fund’s stake in the company increased to around 19%.

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