Plus500, a Haifa-based company that operates a platform to trade financial instruments, has completed an unexpectedly large $75 million issue of shares for trading on the London Stock Exchange’s Alternative Investment Market.
The initial public offering for London’s small cap stock market ends a lengthy drought of initial public offerings among Israeli Internet companies. Based on the share issue, the Haifa-based company’s market value was $200 million.
The company, whose shares will begin trading on Wednesday under the ticker symbol PLUS, had set out to raise $50 million but expanded the offering to $75 million following strong demand. The share price was set at 1.15 pounds.
“We are delighted with the strong level of support from institutional investors, which is testament to our future prospects,” said Gal Haber, the company’s CEO and one of six cofounders. “We believe that we have built an attractive and scalable business, underpinned by the group’s proprietary technology and self-developed trading platform,” he added.
Plus500 provides an online platform for the trading of so-called contracts for difference (CFDs), which are derivative financial assets based on stocks, securities, indices, foreign currencies and exchange-traded funds.
The trading platform allows investors to buy or sell the contracts with heavy leveraging of up to 100 times the value of their original investment. Plus500 doesn’t collect any fees but makes its money on the spread between the buy and sell rates of assets traded.
Over the past two years revenues have risen sharply, to $56.1 million in 2012, with net income reaching $17.1 million for the year. The company ended the first quarter of 2013 with revenues totaling $19.8 million and net income of $5.2 million.
Prior to the IPO, Plus500’s shares were owned by cofounders Alon Gonen (39.7%); Haber, Elad Ben Izhak, and Shimon Sofer (about 14% each); and Omer Elazari and Shlomi Weizmann (about 9% each). The company has 50 employees and is registered in England and Wales, but not in Israel. It is licensed for trading CFD contracts in Britain and Australia.
“The main reason for the stock offering is transparency to customers and credibility,” Haber said. “We believed we needed to move in the direction of a share issue, even though we’re a profitable company without cash-flow problems. The main target of the company wasn’t actually to raise money but for its reputation.”
The Plus500 website offers NIS 100 to individuals identifying themselves on the site. Haber explains that this is a marketing gimmick to attract customers.
“The moment someone leaves his phone number on the site, he tries to start trading,” he explained. “He can do this in our demo mode that completely reflects the trading but with no time limit, or with money we give him to open an account.”