US asset manager BlackRock has become a partner at interest in Israeli online CFD platform Plus500, after acquiring a 7% stake for $160 million.
Plus500's share price, until recently one of the favorites of investors on the London Stock Exchange, has changed direction in recent weeks. After soaring over 400% between December 2016 and August 2018, the share price has since plummeted over 30%, reducing its market cap to £1.6 billion ($2.2 billion). Plus500 operates an online contract for difference (CFD) platform for the world's leading indices, currencies (digital currencies have recently been added), and commodities, as well as on leading shares. The company charges a fee based on the difference between the purchase and the sale price.
Three weeks ago, Playtech, formerly controlled by billionaire Teddy Sagi, which held 10% of Plus500's capital, sold all of its holdings in the company for a total of £176 million ($235 million), thereby garnering an enormous profit. In 2015, Sagi took advantage of a plunge of over 50% in Plus500's share price, following a probe of the company by the UK regulator, who reconsidered some of the verification and identification documents of Plus500's customers because there was concern about money laundering offenses. The probe resulted in the accounts of some of Plus500's customers being frozen, and the company stopped recruiting new customers.
At the time, Sagi offered to acquire Plus500 through Playtech, which provides a software-based online gambling platform, at a £460 million value (less than 30% of its current value. The offer was accepted by all of Plus500's shareholders, but Sagi's dream of becoming a forex empire was shelved in November, after the companies reported that they had failed to obtain approval for the deal from the UK Financial Conduct Authority (FCA), and it was agreed that the deal would be called off.
One day before Playtech liquidated its holdings in Plus500, Plus500's five founders sold 8% of its shares to investment institutions for £145 million ($195 million). The founders - Gal Haber, Elad Ben-Izhak, Alon Gonen, Omer Elazari, and Shlomi Weizmann - cited "a wish to diversify their holdings and personal reasons" as their explanation for the sale. Following the announcement of the sale, Plus500's share sank 6.6% to £15.02 the same day and has not recovered since (the current share price is £14.12, compared with the peak of £20.40).
The share price has risen 10-fold since the company's 2013 IPO
These sales made investment firm BlackRock a partner at interest in Plus500, after the former acquired 7% of Plus500's capital for $160 million. BlackRock apparently believes in the continued growth of Plus500, which has provided its shareholders with excellent results in recent quarters. Plus500, managed by CEO Asaf Elimelech, finished the first half of 2018 with $465 million in revenue, 147% more than in the corresponding period in 2017, and a $262 million net profit.
In addition to expanded trade in contracts on share indices, Plus500 benefited in the final months of 2017 and the first quarter of 2018 from a major increase in trading in bitcoin and other cryptocurrencies. In the second quarter of the year, however, its growth slowed significantly, with revenue falling from $297 million in the first quarter the first quarter in the first quarter to $168 million in the second quarter, a 43% drop. On the other hand, the company completed a number of streamlining measures in the past two years, pushing its net profit ratio up from 36% in 2016 to 46% in 2017 and 56% in the first half of 2018.
All in all, long-term investors in Plus500 shares have reason to be satisfied: the share price has multiplied 10-fold since the company's IPO on July 2013. The recent sales of shares by the company's five founders left them with an aggregate total of 14% of Plus500's shares, after having accumulated hundreds of millions of dollars from the sale of shares and dividends.
Published by Globes [online], Israel business news - www.globes-online.com - on September 26, 2018
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