If you had any doubts about how bad the ongoing low Volatility environment is for retail broker revenues, Plus500 is in with some data. The company shared with investors that during the first quarter of 2019, the firm’s revenues declined by a whopping 82 percent.
The news should, however, be taken with some caution as the company’s first quarter in 2019 was widely distorted by the cryptocurrency markets crash in the first quarter of 2018. The result for the first three months is greatly affected by the deteriorating market condition in FX, Equities and pretty much every other asset class but bonds, which are not the favorite of retail investors.
Plus500 is reporting a total of $53.9 million of revenues in Q1, as the first weeks of April continue to be looking very discouraging for the brokerage industry. FX volatility continues to be at all-time lows despite an increasingly diverging economic picture between the US and the rest of the world.
Stock Reaction
Shares of London-listed Plus500 tumbled on the news, dropping by as much as 44 percent, before stabilizing around 550 pence per share, which is still down by 24 percent on the day. The stock hit its lowest level since 2017, just below 400 pence per share.
Plus500's Stock on the 12th of April 2019
Commenting on the reasons for the decline, the company highlighted “extremely subdued financial markets.”
In a statement, the CEO of the company, Asaf Elimelech, said: “Given the level of global political and economic news, financial markets were surprisingly subdued in the period, which reduced the number of trading opportunities for customers. While revenue in the quarter was disappointing, we have much to be encouraged about.”
“Given recent regulatory changes, it is imperative to attract, engage and retain valuable customers and the Company is working on a number of initiatives to extend its reach and further improve the customer experience and the service offered,” Elimelech elaborated.
Revenue Per Client Drops 64% Quarterly
The key performance indicators for the company stood at disturbing levels in the first quarter. Average revenue per client declined by 64 percent to $550. Meanwhile, average client acquisition costs stood at $1,230, a figure which is only down 17 percent.
On the bright side, the number of new clients increased when compared to Q4, rising 10 percent to 21,306. That said, active customers declined by 4 percent to 97,921. Shares of other publicly-traded brokers have also been impacted with IG Group and CMC Markets both dropping by about 10 percent, before recovering to trade around 3 percent lower as of writing.
