In April of this year, Plus500 CEO David Zruia spoke at an event in London and said that the company was weighing up a dual-listing in the US, implying that it would likely result in a higher valuation for the firm.
“London has been very good to us over the years,” he said. “But when you see the companies on the Nasdaq, it’s a different story.”
At the end of last month, Zruia gave another interview where he explicitly said Plus500 is looking at acquiring a company in the cryptocurrency sector.
“I agree [that] the blockchain will be the next technology of the world of trading, and we are looking at acquisitions of companies in this field,” he told the interviewer.
Listing in the US and buying a crypto firm are both big stories. But neither one made any headlines, nor has the company made any comments about them, at least that I am aware of, to analysts or shareholders.
What’s striking about this is the point Zruia made regarding the dual-listing implies that the Plus500 team aren’t happy with their current valuation, or at least they believe that they would be able to achieve a better one by listing in the US.
As I’ve written here before a couple of times, there are likely sectoral and UK-specific reasons why valuations for listed CFD firms remain relatively low. Those can be summed up simply as investors don’t like the UK and aren’t keen on the CFD industry.
Nonetheless, the idea that you can do nothing to improve your valuation because of those two factors, which are largely out of a company’s control, isn’t accurate. IG’s valuation, by most metrics, is much better than Plus500’s, even though there’s a good case to be made that the latter represents a far more attractive investment proposition.
Beyond just delivering good financial results, valuations are in part down to your public relations efforts. Banal though it may sound, how you communicate what you’ve achieved and what you plan on doing is key to actually gaining traction among investors, which then leads to your valuation improving. As an aside, I am not talking here about ‘start-up’ style propaganda, where you make up numbers to create some massively inflated valuation, but actually emphasising real strengths and the potential of your business.
Plus500 is the opposite of a start-up because it makes lots of money but is bad at using the media to improve its valuation. The two comments mentioned above, for example, were both with Israeli outlets that no one in the UK or US reads. Both were in Hebrew as well, so even if they wanted to, many people simply won’t be able to read the articles, unless they use some translation tool.
In fact, Plus500 has not – as far as I can tell – given a single interview to a major media outlet, either in the US or UK, for years. The only one I can find of note is from 2018 when the previous CEO, Asaf Elimelech, spoke to the Evening Standard, a relatively well-read UK newspaper.
If you are a private company with a desire to stay out of the limelight this would be understandable. Plus500 also has a strong marketing strategy that doesn’t require press to onboard clients, as opposed to a company like eToro, which is likely to benefit from PR (and is good at it).
But Plus500 is not a private company and its executives do seem to want to improve their valuation. Their shareholders presumably want the same. And yet they have taken almost no steps, beyond a couple of milquetoast efforts, to do so. Indeed, there are several cases where they’ve done nothing to build on their activity.
Take the acquisition of Cunningham Commodities, the futures broker they bought in the US last year. This was announced via their London Stock Exchange feed with zero fanfare.
Since then there has been little indication as to what they actually have planned for the world’s largest economy. Who, for example, are the institutions they’re going to serve? Why did they buy a futures broker when it’s an asset class that doesn’t seem particularly popular with retail traders compared to options? Along with actually making the announcement exciting, these are things that could have easily been cleared up with an interview or pre-planned comments for press, perhaps via some sort of exclusive.
Compare this to the articles that came out after IG bought tastytrade or a more recent piece in TechCrunch about eToro’s Gatsby acquisition, which was very likely pre-planned given they had direct quotes from CEO Yoni Assia. In both instances you not only understand what the company has done but why it was beneficial to do so.
To be fair, Plus500 may believe that their valuation will improve on the back of performance, although it’s hard to understand why you would want to duel-list if you thought this was the case. The company has seen its share price, on a non-total return basis alone, increase more than 13-fold since its IPO in 2013, but it is still trading below the all-time high it hit in 2018.
There is some merit to this point. However, it serves a company well to market itself on the back of strong performance. For instance, Terry Smith has been the UK’s leading fund manager for about a decade now (he may not be for much longer). But his AUM didn’t grow solely on the basis of performance.
He writes regular letters to investors and has an extremely popular annual meeting with them, where the floor is open to questions. On top of this, he frequently does retail-oriented media interviews, whether that’s with share dealing platforms, trade mags, or major news outlets. These things have, at least until now, served him extremely well – many of the claims he makes, whether it’s on benchmark hugging or trading costs, have effectively become his brand and many of his fans are likely to be able to repeat them verbatim.
Plus500 is not a fund, so it’s unfair to say they should behave in exactly the same way. The principals do remain the same though. Using the media is a good strategy for engaging with current and prospective shareholders, improving your valuation, and building trust in your brand. Someone should let the people at Plus500 know!
