Punters betting on volatile financial markets during the Covid-19 crisis have won more than half of the revenues earned by the online trading platform Plus500, sending the company’s shares down by nearly 8%.
The firm – which operates like a bookmaker and allows traders to place wagers on stock, currency and commodity market movements – said its second-quarter revenues had surged to $249m (£197m), only for that figure to be slashed to about $102.5m because of payouts to customers who had placed winning bets.
Online trading firms tend to experience increases in demand during periods of financial market volatility, such as those fuelled by the effects of the coronavirus pandemic.
Unlike many of its rivals, Plus500 does not generally hedge the bets it takes. This means it loses money when its customers win, and vice versa, which has contributed to a history of fluctuating fortunes for the business.
David Zruia, interim chief executive of Plus500, said: “We have consistently stated that customer trading performance is subject to significant market movements and is therefore likely to fluctuate. This is magnified during periods of heightened market volatility, such as those we are currently experiencing and given the growing scale of the business.
“Nonetheless, we continue to expect this performance to revert to a medium-term historical level of near zero and our outlook for the year remains unchanged.”
Plus500 did not specify which markets or traders were involved in the losses. However, it said the bulk had come in the week that ended on 5 June, when stock and oil markets globally were rallying strongly. The company has attracted 100,000 new customers in the second quarter.
Shares in the FTSE 250-listed firm, which have gained more than 30% so far this year and more than 50% since late March, were down close to 8% at 1,120.32p at 1pm on Monday.
The company is valued at around £1.2bn, and has approximately $473.9m in cash, down from around $515.6m on 31 March.
Shares in the rival IG Group, whose shares have also jumped by around 30% since late March, were also trading down by around 3%, at 750p.