27th May 2015 07:58
LONDON (Alliance News) - Plus500 Ltd, which provides an online platform for retail customers to trade contracts for difference, Wednesday said revenue generated by customers of its subsidiary in the UK has been "significantly impacted" after the company froze customer accounts as part of actions on its anti-money laundering processes.
Plus500 has been the target of short-sellers - investors who bet on a fall in a company's share price - who have questioned the company's business practices and accounting, prompting the company to address some of those claims.
"The board is aware of recent press and blog commentary regarding Plus500's accounting policies and business model and rejects the assertions made as misrepresentative and baseless. The board reiterates that the company's accounts, along with those of its subsidiary, Plus500UK Ltd, have received unqualified audit opinions from PwC and the directors are comfortable with the disclosures made therein," Plus500 said.
"In response to the specific issue raised in respect of the restatement of Plus500UK's subsidiary accounts and the implication that group revenue is substantially over-stated or a substantial amount is generated in unlicensed jurisdictions, we clarify that both assertions are incorrect. The application of the new Financial Reporting Standard 102 resulted in the reallocation of gross revenues attributable to Plus500UK's customers to Plus500 in the company's 2014 results. This also required the 2013 results to be restated. The reallocation has no impact on group consolidated revenue," Plus500 added.
Shares in Plus500 were up about 6.5% at 303.62 pence on Wednesday morning, but the company has lost about half of its value in terms of market capitalisation since the beginning of 2015, with some large short-selling positions being reported.
The shares tumbled earlier this month as the company confirmed that the UK's Financial Conduct Authority required it to verify its customers in the UK and ask them for documentation in doing so. Plus 500 said it has 40 people working on customers' documentation, with the process expected to take about another month to work through.
"Regarding new Plus500UK customers, the modifications to our onboarding processes continue to be developed and it may take about a month for the new processes to be implemented," Plus500 said.
The company said its revenue amounted to USD25.8 million in the second quarter up until May 25, compared with USD45.5 million in the corresponding quarter of 2014. That said, revenue so far in 2015 was USD107.9 million, ahead of the USD106.2 million recorded in the first six months of 2014.
"Given that periods of less than a quarter can be volatile, we recommend caution in extrapolating from these figures," Plus500 said.
Plus500 said trading at its subsidiaries outside of the UK has continued as expected, although the company estimated that in the past two weeks group revenue has been reduced by about USD4 million.
"However, at this point it is not possible to accurately estimate the possible effect on the group's annual revenues," Plus500 said.
In addition, the company said it has spent "appreciably more on marketing" so far in 2015, with more new customers in April and May than in the same two months of 2014.
"The board anticipates that there will be certain short-term cost implications relating to the remediation actions, which we currently conservatively estimate at USD2 million," Plus500 said.
The company is holding its annual meeting of shareholders at 1100 BST in London.
By Samuel Agini; [email protected]; @samuelagini
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