Plus500 Ltd (lon:plus)
Plus 500 – I Have A Problem With The Whole Business Model!

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Title: Plus 500 – I Have A Problem With The Whole Business Model!
Company: PLUS - Plus500 Ltd
Share Price Then: 1004p
Author: Ian Smith
Date: Tue 12 Feb 2019
Comments: Plus 500 are a provider of CFDs, Contracts For Difference and as far as I can tell this is all they offer, especially in the UK.

Today’s big 30% plus drop was not due to the latest trading figures, but due to a warning that regulation is likely to hit the business in the future.

This warning is not a surprise as regulation has forced their web site to have a message at the bottom of screen that says “80.6% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.”

Added to this the preliminary results include “Exceptional first quarter benefitting in particular from Cryptocurrency trading;”

This does not reassure me that it has a customer base that is making informed trading/investing decisions and will be there for the long term or that departing customers will be easily replaced.

I know people who have bought Cryptocurrencies as their first investment and got into trouble and others who got into trouble when BetFair first opened, so it seems that there is always a new supply of people willing to take bigger risks than they really understand.

CFDs are complicated and not something that a newbie can just sign onto a site and make a quick first trade so getting high volumes of new clients is likely to become difficult and expensive, especially as in the past CFDs for retail clients was something new and are now becoming better understood.

As Plus 500 only deals with retail customers it is possible that it can find or sustain growth in other areas of the world with a more liberal attitude to CFDs or can find a way to create a new product that is not regulated so heavily.

Yet I have to wonder if one day shareholders will wake up and find the company has been regulated out of business!
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