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Gambling is a fool’s game but financial bookmakers have been some of the best stock market bets in Britain. Shares in the Israeli spread betting group Plus500 are up 2,000 per cent since listing little over a decade ago. Add dividends to the mix and the performance moves above 5,000 per cent. An improvement in its full-year outlook and $185.5mn of additional shareholder returns pushed the shares higher still at interim results on Monday. There is good reason to believe the returns will keep coming.
Plus500 and its London-listed peers IG Group and CMC Markets are tied to the whims of global markets, as well as the army of retail investors who favour the typically riskier investment methods they offer. Structural growth underpins the long-term equity story. For Plus500 that means creating new markets and products to keep the flow of new customers and deposits rising. “Knock-out” options for Japanese retail investors are one recent addition but the opportunity in the US is most promising.
Volatility in global equity markets has already reared its head this summer amid fears of a hard landing for the US economy. With stocks priced for perfection and questions being asked about the profitability of AI investments, further ups and downs seem likely. Spread bettors, who thrive on volatility, appear to be getting ready to take advantage: average deposits for active customers rose 30 per cent to $8,400 in the first half at Plus500. Rate cuts and the US election should add to the activity.
Spread bettors appear to be increasingly loyal to Plus500’s technology. Some 64 per cent of the company’s over-the-counter revenues came from customers who have been with the group for more than three years, up from 55 per cent in the first half of 2023.
As a result, Plus500 is confident that annual ebitda will be ahead of market expectations, which were for about $315mn before Monday’s update. The company’s own cash balances surpassed $1bn for the first time in the first six months. That means plenty on hand for further payouts. Total shareholder returns tot up to $360mn this year — equivalent to 15 per cent of Plus500’s market value. Some $2.3bn has been returned since its 2013 IPO.
The group’s shares have rarely traded much above the current nine times forward earnings but a re-rating remains possible. A discount with IG, also on nine times today, has been closed since 2021. As Plus500 continues to deliver cash and on promises made, a premium for the shares does not look like an outside bet.
