The online trading company Plus500 has signed-off on a jaw-dropping USD 700 million deal to be sold to Playtech, following internal problems with the former firm.
Plus500 is one of the most reputable companies when it comes to trading via the internet, or so many have thought. For years they were the go-to destination when clients wanted to trade services online, however in recent times it has lost that reputation. In late 2014, gambling news stared to emerge about the shaky integrity about the company, as they were rumoured to have some grey practices.
• Plus500 carried a great reputation before the probe
• FAC investigates Plus500 over some dealings
• Playtech can sever the deal at any time
Some officials began to scrutinize them, considering their model and processed did not follow the standard guidelines. In addition, their marketing strategies were also brought into question, as it was rumoured that positive reviews posted online may in fact be fake. Playtech has now decided to buy the company as they aim to broaden their overall services, however they can back out at any time if they desire.
Company’s value depreciated due to regulatory probes
The UK Financial Conduct Authority issued an order to block the accounts of Plus500 in the middle of May. This was part of the reviewing process, after reports surfaced that they were involved in some potentially shady dealings. The review was concerned with uncovering more details as to the anti-money-laundering controls initiated in January. This is what caused the company’s value to depreciate, which is what attracted many short-sellers in the stock market.
Playtech was one of the initial companies to express interest in buying the Israeli-base trading firm, although there were other big names involved as well. Valiant Capital Management didn’t want to miss this great opportunity to profit, as they started betting against Plus500. 55-year-old billionaire hedge-fund manager Crispin Odey also made sure to get in on the action while it was hot. He supposedly purchased stock in the company following the drop in prices of the once prominent online trading provider.
Playtech stated that they would be paying 400 pence per share for Plus500, which represents only a fraction of its value weeks ago. Analysts report that a month ago, the company shares were trading at around twice as much than the current cost of the deal is at the moment. The representatives of Playtech insisted on protecting themselves, should anything go wrong in the meantime. If by some chance the business does not succeed and ends up becoming a potential liability, the agreement can be written-off, mobile casinos report.
The chief executive of Playtech, Mor Weizer, highlighted that importance of making swift and clever decisions in order to maximize on the given opportunity. ”We wanted to act quickly. We see an opportunity. We believe that by combining the two, we will remedy the situation.” He also added that a clause exists in the agreement which would allow them to pull away if the business conditions did not suit them. “There are certain scenarios defined in the agreement that for certain material adverse change affecting the business, the transaction basically becomes void.”
Playtech can still pull out of the deal
The share value of Plus500 went up 8.9 percent due to the acquisition deal, however once the executive of Playtech voiced the specifics of the agreement, the market responded negatively which saw the online trading company lose all of its previous gains. According to online internet casinos, Weizer stressed that there would be more details and points pertaining to “adverse change” conditions of the deal released to the public in the imminent shareholder circular.
The CEO of Plus500, Gal Haber, commented that the FCA (Financial Conduct Authority) discovered “major failings” in the way the company gathered information on its customers’ residential and, more importantly, financial standing. This is what led to the firm losing over two-thirds of its value a little more than a week ago.
Plus500 is not the first online trading provider to be bought by Playtech. Another popular firm called TradeFX Ltd. was also recently purchased by the software company as they aim to provide their numerous client base with more options. Plus500 allows retail customers to trade global contracts for difference, which started late last month following the company’s statement that they were being scrutinized by the authorities.
Simon Young, a prominent fund manager at Aviva Plc, pondered the question if one week would suffice to put all the necessary due diligence in order, considering the probe being carried out by the regulatory body, as per UK gambling laws. Weizer stated that they have done everything within their means make this project work. “I know it’s only a week, but within this week we basically injected all possible resources into this project.” He also commented that they feel at ease now, having completed the important due diligence process. “We managed to go through all the relevant due diligence processes for us to feel comfortable that this is the right transaction for us.”