Plus500 intends to list on London Stock Exchange’s main market, alongside very well respected and long established giants such as IG Group, CMC Markets and Hargreaves Lansdown. The question is, will this be allowed? We look at Plus500’s intentions in detail, and voice our opinion.
The massive surge by retail FX companies toward high profile mergers and acquisitions and public listing of their stock which occurred in 2013 has more or less ground to a halt.
During the course of 2013, a number of retail FX brokerages experienced tremendous growth and had managed to attract enough attention to issue IPOs, whilst others such as FXCM, went on massive acquisition sprees.
One of the notable examples of this is also a company which has managed to perplex a large number of FX industry executives by its tremendous and somewhat unstoppable success whilst hailing from humble origins and having a very small payroll, that being Plus500.
Plus500 originally caught the eye of the large firms in July 2013 when it announced its intention to list its stock on the Alternative Investment Market at the London Stock Exchange, which is a sub-market of the London Stock Exchange (LSE) that is designed to help smaller companies access capital from the public market.
Referred to by its acronym AIM, it allows these companies to raise capital by listing on a public exchange with much greater regulatory flexibility compared to the main market. Companies seeking to do an initial public offering (IPO) and list on AIM are usually small companies that have exhausted their access to private capital but that are not at the level required to undergo a IPO and list on a large exchange, hence this has been the darling of many aspiring retail FX firms because it allows smaller companies with less criteria for examination by pre-listing auditors and less pedigree than the blue chip legacy companies of LSE’s main market to enjoy the kudos of having a London Stock Exchange listing.
Nowadays, the main market consists of listings of long established British companies such as IG Group which entered the main London Stock Exchange market in 2005 with a valuation of £393 million, Hargreaves Lansdown which was first listed on the London Stock Exchange in May 2007, with the company’s two founders then holding combined stakes equivalent to 80% in the business and more recently CMC Markets, which was first listed on the main market of the London Stock Exchange at 240p equating to an initial market capitalisation of £691 million in February 2016.
These are highly reputable companies which have the majority of their business firmly within the domestic market, and have their own trading infrastructure, all of which have been established in excess of 30 years, therefore it is fair to consider them to be the establishment of British electronic trading.
Upstarts from overseas such as Plus500, however, have less credible bases for listing on the main market, but in Plus500’s case, a listing on the AIM was accepted and the firm raised $126 million post listing in 2013, and is now a $1 billion company.
FinanceFeeds has found out that the firm has aspirations of moving its listing to London Stock Exchange’s main market, and has stated its intention to do so.
Plus500 has stated that it, together with its subsidiary undertakings, intends to apply for admission of all of its issued ordinary shares of NIS0.01 each (“Ordinary Shares”) to listing on the premium listing segment of the Official List of the UK Listing Authority and to trading on London Stock Exchange plc’s main market for listed securities (together, “Admission”). Pursuant to Rule 41 of the AIM Rules for Companies, the Company hereby gives notice of the intended cancellation of trading of its Ordinary Shares on the AIM market of the London Stock Exchange (“AIM”).
The Company believes that the Main Market is the most appropriate trading platform for the continued growth of the Group and, together with a premium listing, will:
· provide a more appropriate platform for the continued growth of the Group and further raise its profile and status;
· increase the profile of the Group in the UK and internationally, thereby helping it to attract new customers;
· benefit Shareholders due to the further development of the Group’s corporate governance, regulatory and reporting disciplines (although the Group already adopts many of the corporate governance, regulatory and reporting disciplines of companies with a Premium Listing);
· further place the Company in a better position to achieve improved liquidity and valuation in its Ordinary Shares due to the higher number of institutional investors which regularly trade in the shares of companies admitted to the premium listing segment of the Official List;
· facilitate potential inclusion in the FTSE indices;
· provide diversification of funding sources to support the Group’s long-term growth;
· result in the Ordinary Shares becoming an improved currency for any acquisitions, as appropriate; and
· further assist in the incentivisation and retention of key management and employees.
Asaf Elimelech, Chief Executive Officer, said “Since our AIM IPO in 2013, we have grown the business many times over and become a more mature business in governance, regulatory and reporting terms. We therefore believe now is the right time to seek the listing to help further advance our ambitious global growth plans. The recent announcement of regulatory changes to the CFD industry by ESMA has also ensured that the framework in which we operate is now the clearest it has ever been.
“We believe that the listing and our shares being traded on the Main Market will provide a number of benefits for shareholders, including increasing the Company’s profile and status, providing currency for growth and facilitating potential inclusion in FTSE indices. Together these developments are expected to enhance the liquidity of the Company’s shares and provide a greater range of potential investors for the Company both in the UK and overseas, reflecting the global nature of its business.”
Admission will be effected through an introduction of all of the existing issued Ordinary Shares. The Company will not be issuing any new Ordinary Shares in conjunction with the proposed Admission.
It is expected that the Company will publish a prospectus in connection with Admission (the “Prospectus”) on or around the week commencing 18 June 2018 and that the Ordinary Shares will be admitted to the Official List and commence trading on the Main Market, simultaneously with trading being cancelled on AIM, at 8:00 a.m. on 25 June 2018 (being at least 20 business days after the date of this announcement), subject to the receipt of the necessary approvals from the UK Listing Authority and the London Stock Exchange.
Should this proceed, he Ordinary Shares will continue to be registered with their existing ISIN number IL0011284465 and SEDOL number BBT3PS9. The Company’s TIDM ticker symbol will remain PLUS. The Prospectus will, when published, be made available on the Company’s website at www.plus500.co.uk/Investors and will also be submitted to the National Storage Mechanism, where it will be available for inspection at www.morningstar.co.uk/uk/nsm.
Liberum Capital Limited (“Liberum”) is acting as sponsor to the Company in connection with Admission.
The Company’s existing shareholders should consult their own tax advisers as to the tax implications of the Company’s proposed move to the Main Market. Generally, on the move to the Main Market, the depository interests representing Ordinary Shares (“DIs”) will continue to be excluded from being “chargeable securities” and as a result no stamp duty reserve tax (SDRT) will be payable by the purchasers of those DIs.
It is FinanceFeeds opinion that a company which operates in the manner that Plus500 does in the respect that it relies heavily on zero-touch client acquisition via a very comprehensive proprietary digital marketing system hence its compliance with KYC regulations remains a moot point among London’s established companies that go to extremely detailed lengths to ensure customer satisfaction, longevity and compliance, as Plus500’s short term, low value client acquisition results in them not able to ‘know their client’ until a withdrawal is to be made.
This resulted in an intervention by the FCA in 2015, in which all trading, deposits and withdrawal activity was ordered to be stopped by the regulator, crashing the company’s share prices.
Very quickly, Plus500 worked on resolving this, and has been allowed to continue its operations, the share prices soon rocketing back up to their previous level and the value of the company resuming to over $1 billion.
Investor confidence is high because of the very lean operating model, and the company’s own proprietary CFD platform which means that its intellectual property is on its own platform.
One of the often overlooked sticking points for brokers which use third party platforms such as MetaTrader 4 in attempting to list their stock on a public exchange is that by operating via a third party trading system, their intellectual property is on another company (MetaQuotes) platform, hence there is no intrinsic value for auditors to appraise when signing off an IPO. This was investigated and looked into by FinanceFeeds at length recently.
Most British and American firms have their own infrastructure, hence nowadays almost all are publicly listed on main exchanges, and Plus500 is no exception as it may well be Israeli by origin, but it is based and regulated in London, has its own CFD platform and has a vast capital base.
The firm has managed to weather its recent cryptocurrency related losses very well indeed. The last quarter of 2017 heralded substantial losses for many retail brokers over a very short period of time, however when looking at Plus500’s end of year report, a massive profit was detailed, and no cryptocurrency related losses were evident.
However, a listing on the main market of LSE would entail a very detailed due diligence inspection, therefore any risk management issues such as very high risk cryptocurrency product offerings resulting in no-recourse losses, lack of KYC structure that resembles that of other high-touch FCA regulated retail FX brokerages who really go the extra mile to know their client and as a result have very long standing loyal client bases, and a silent, very guarded communication to the outside world may well not be regarded as ‘cricket’ by the traditional and very detail orientated British acceptance committees at the LSE.
Thus, currently this is an intention to list, and must be placed before said committee, audited, and prepared for application, and subject to a very establishment-led decision.
Watch this space.