Shares in online trading platform Plus500 crashed today after it predicted revenue would plummet 82 per cent in the first quarter of 2019 compared to a year before.
The company, which specialises in contracts-for-difference (CFDs), a high-risk currency instrument, issued a warning in February that profits would be hit by the introduction of stricter betting regulations.
In a trading statement today Plus500 said its revenue in the first quarter of 2018 would be $53.9m (£41.3m) compared to $297.3m in the same quarter a year before. The company said the poor figures were due to “extremely subdued financial markets across most asset types.”
It estimated its number of new customers had fallen 55 per cent in the first quarter, to 21,306 compared to 72,960 a year earlier.
The announcement sent the company’s shares spiralling downwards, at one point falling 44 per cent. They had lost 33 per cent shortly after 4pm UK time, and stood at 485p.
The company's annual report, also released today, revealed the salaries of chief executive Asaf Elimelech and finance director Elad Even-Chen had more than doubled to $6m.
Plus500 has been hard hit by European Union regulations, announced last year, which cracked down on the amount of money amateur traders can borrow from brokers as they bet on market movements.
Justin Bates, head of research at Canaccord Genuity, said: “It was truly a terrible quarter” for Plus500. He said there was “huge impact from the leverage restrictions, probably more than any body had anticipated”.
The company was afflicted by scandal in February when it revealed it had suffered a $103m loss from client trading in 2017, when it had previously explicitly stated that it had incurred no losses from bets with customers. In February, Plus500 put this failure down to a “drafting error”.
Shares in the company fell by 50 per cent from 11 February, when the mistake was announced, to 18 February, a week later.
Portia Patel, financials analyst at Canaccord Genuity, said: “I think it's fair to say investors trust in the management team had been completely decimated.”
Last September the founders of Plus500, including current managing director Gal Haber, sold an eight per cent stake in the company at a price of 1550p per share, three times the current share price, netting the group of five £145m.
Last night, Australian regulators announced that some online trading companies may have been soliciting clients to open accounts in Australia “on the basis doing so will avoid the overseas intervention measures”.
While Australian regulators made no suggestion that Plus500 had done this, online trading platforms will worry that Australia could introduce regulations such as those in place in Europe.
Plus500 told City A.M.: “We welcome best practice approaches in the industry, and will adapt to any new regulatory landscape, as we have in other jurisdictions. We have a flexible business model that allows us to adapt in an efficient and timely manner.”