Two days ago, the stock price of CFD Broker, Plus500, suffered a considerable and sudden decline. The drop seemed to be inexplicable to analysts of the financial trading brokerage stocks segment, as no apparent reason was behind it. Forex Magnates has unearthed the possible source, a UK-based short seller with a history or driving down share prices of companies he targets.
Simon Cawkwell, nicknamed Prophet of the plunge and Evil Knievil by the British media, is a London accountant and stock market commentator writing on a stock tipping website. He reportedly makes his living by publicly denouncing companies whose share price, he believes, will fall and then short selling the stocks himself. Mr. Cawkwell is credited as having attacked the share price of many companies in this way over his long career and has admitted to running short selling raids on firms in the past.
In a message sent by Mr. Cawkwell to the subscribers of his stock tips service, he targeted Plus500 and questioned the performance of the company, despite admittedly having no proof:
Mr. Cawkwell's hypothesis may well have been the reason for the sudden drop in the Plus500 share price, and could be the first shot in a short selling raid on the stock. Speaking with Forex Magnates, Elad Even-Chen, Head of Investor Relations for the company, said that he has been receiving calls from investors asking if any negative announcement was made, explaining Tuesday's drop.
However, the fact that the company's financials are strong for the segment, with over $100 million in revenues last year and an EBITDA margin of 58%, seemed to reassure some Plus500 investors. The stock made a partial comeback, and this morning it was announced that JPMorgan Chase clients took advantage of the lower price to scoop up shares, giving them ownership of 14% of the company. Time will tell if it was indeed the short seller's attempt at plus500 that stirred the minor havoc, and what their next move will be.
Update: The company's Head of Investor Relations, Elad Even-Chen, shared with Forex Magnates' reporters, "The assertion that our turnover and profits are provided by an associated company which is not declared as such is wholly wrong. We are fully transparent that our UK FCA regulated subsidiary is our principal trading subsidiary (alongside our Australian ASIC regulated subsidiary). "
