RE: FT Lex Article11 Sep 2018 09:43
A buy signal for index funds looks like a sell signal for active investors in Plus500, which deals in contracts for difference. Last week, the London Stock Exchange said shares in the group, which targets retail investors, would join the FTSE 250 index. No surprises there. The stock has nearly quadrupled since the start of 2017 to about £15. Demand for derivatives on cryptocurrencies turbocharged revenues over the period. Profits upgrades became the norm.
But good times may now be in the past, as with bitcoin. On Thursday, the day after the FTSE news, five of Plus’s founders said they were cashing out 8 per cent of the group’s shares in a sale worth £145m, halving their combined stake. Then on Friday, gambling software company Playtech announced the sale of its whole 10 per cent stake. It has held shares since 2015.
Cynics will raise their eyebrows at sales for “personal reasons” by five founders. One of them, Gal Haber, is a board director. But well-connected private investors rarely make calls whose prescience later looks suspicious, academic studies show. Diversification and family finances are common motives, as with other investors. As if in confirmation, the founders offloaded stock worth £100m in 2016, when the share price was only about 660p.
It is indisputable the founders have the experience to interpret public data shrewdly. So does Playtech, owner of retail CFD brokerage Markets.com.
The crypto bear market is just one reason to sell. Another is a move by European regulators to restrict trading of speculative products to protect the foolhardy. In February, Plus said it believed the rules were “unlikely to have a material adverse effect” on its business. In August, the month the rules came into force, it said they could affect 30 per cent of its revenues.
Last week’s heavy selling should irk passive fund managers. Under index rules they must buy a stock that is already well off the highs of last month. For investors without such obligations, it is time to abandon ship.
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