Plus500 shares dive 7.5% in wake of Pfizer COVID-19 vaccine
The market just doesn’t understand the Retail FX/CFD space.
As investors spent the day Monday sorting out the potential winners and losers from what seems to be light at the end of the long COVID-19 tunnel in the wake of Pfizer’s vaccine trial results, one of the companies on the “casualty” side of the ledger was Plus500.
Shares of the leading online CFD broker were fairly stable all morning Monday, trading slightly above Friday’s 1,483p closing price. Then came Pfizer’s just-before-noon (London time) announcement that its 43,000+ person COVID-19 vaccine trial has demonstrated more than 90% efficacy in preventing COVID-19 sickness. What ensued was a huge surge in (most) equity prices with most European equity indices (and US Futures) rising 4-5% alongside a 10% rise in the price of crude oil.
But there were losers as well.
Gold prices fell by about 5%. And a number of specific equities traded down sharply, notably those that performed well lately at least in part thanks to the after-effects of COVID-19. For example shares of video conferencing firm Zoom were down 15%, as the prospect of returning to in-person meetings (and schooling) seems more realistic.
And for some reason Plus500 found itself among the losers on the day, with the crack of 12:00 noon bringing a wave of selling that sent Plus500 shares down by 7.5% to close at 1,372p.
Plus500 shares trading on Monday, November 9, 2020. Source: Google Finance.
We find that all somewhat ironic, as Monday itself will probably turn out to be one of Plus500’s best ever, thanks to all the aforementioned volatility and a surge in trading volumes. A few days like what was seen Monday – and there are likely to be a few more in the coming weeks as the US election continues to unfold and the world continues to battle the COVID-19 virus through fall and winter – and Plus500 is likely to have another great quarter.
So what happened?
Well, we believe that (many) investors and traders just took a look at charts showing which companies have done well this year in the shadow of COVID-19, and decided to sell those names whether or not an effective vaccine might help or hinder that specific company’s prospects.
Plus500 shares have indeed done very well this year, climbing from the 900p range in January and February to the 1,400-1,500 range lately as the company posted record results for the first nine months of 2020. The company clearly feeds on market volatility, doing well when markets are volatile driving traders to trade more.
Will an effective COVID-19 vaccine change that? We think not, certainly not in the near to medium term.
Interestingly, the trading activity in shares of some of Plus500’s key publicly traded rivals was much different, with the Pfizer vaccine news hardly affecting them. IG Group (LON:IGG) was down slightly 0.8% on the day. CMC Markets (LON:CMCX) was up 0.6%. And in Switzerland Swissquote (SWX:SQN) was up 2.3%. All of those brokers have had fairly good years so far, although not to the degree Plus500 has had.
We believe that Plus500 is likely to take advantage of this dip in its share price to ramp up its share buyback program, which is likely to see the company buy back upwards of $67 million in stock through to the end of February.