Accounting Error! Plus500 shares plunge

Plus500 shares have just plunged to a record low within the last year or so. The company admitted to having a serious mistake with the accounting process this month. It turned out that the company lost more than $103 million according to those accounting errors. Naturally, seeing such a loss the investors would become quite bearish and sell their stock as soon as possible.

Plus500 has already commented on the fact and actually reported the error when it filed a report to the London Stock Exchange on Friday. It needs to be noted that this is not the first time this has happened. Back in 2016, a similar case was associated with a $20 million loss, which is nothing to snarl at.

Closed market at a loss

The market closed with a share price of 921.50 pence per share of Plus500 in London last Friday. It is quite sad to see such a decrease as there was once a time that the shares cost more than 2k pence a piece. The price was highest when the company held an IPO. Plus500 representatives have already identified the problem on page 44 of the 2017 accounts. However, nobody was expecting such a bearish reaction from the investors. This is basics of Technical analysis of stocks, the moment a company’s revenue takes a hit, there will always be jumpy investors and a plunge in price is almost always expected.

In addition to that, most of the popularity that Plus500 had gained within the last 2 years was because of their products connected to cryptocurrencies. Adding that to the mix, we already see why the investors jumped to bearish sentiment.

Will they bounce back?

Plus500 also disclosed information that the expected material operations and financial impact will significantly limit the amount of leverage they can offer to their customers. This is a serious hit as Plus500 was sort of like a bulwark in the wake of ESMA regulations, but in the end, it looks like they will have to cater to the whole thing. The company is expecting profits that would be a lot lower than the current market expectations in 2019.

It’s sad to see such a large company fall victim to a small error. The mistake itself cost the company millions if not billions if the sentiment continues. But for the investors, it is a perfect time to look into buying the shares. Therefore it is still expected that the stock price will just bounce back up without too much of a hassle. But that bounce-back may take months or even years.

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Konstantin Rabin

About the Author: Konstantin Rabin

Konstantin has been working in the financial services industry since 2011. He is over-viewing various updates in the technology, regulation, and market movements. He's passionate about games and has a cute cat named Dog.

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