Online trading platform Plus500 has seen its shares tumble by nearly a third after warning over full-year profits due to a regulatory clampdown across Europe.
The Israeli-based broker, which is listed on the FTSE 250 Index, said 2019 profits are likely to be “materially” lower than expected due to a sales hit from new EU regulations combined with plans to maintain marketing spend.
The alert sent shares crashing 30%.
It follows the introduction of tighter regulations on the sale of some complex financial products to retail clients.
Plus500 offers contracts-for-difference (CFD) that allow investors to take high-risk bets on the future performance of currencies, stocks and cryptocurrencies.
But the European Securities and Markets Authority (ESMA) has been cracking down on retail CFD trading, imposing temporary restrictions in August and extending these for three months from February 1.
While annual results showed a near doubling in Plus500’s pre-tax profits to 503 million US dollars (£392 million) for 2018, up from 253.4 million US dollars (£197 million) in 2017, the group revealed the new rules would not see a repeat of the performance in 2019.
Plus500 said: “Following our latest assessment of the impact of the ESMA regulatory measures, full-year 2019 revenue is expected to be lower than current market expectations.
“This, combined with our intention to maintain our marketing spend, is likely to result in 2019 profit being materially lower than current market expectations.”
But chief executive Asaf Elimelech backed the EU changes and put faith in the firm’s ability to offset the hit.
He said: “Although we have seen a marked reduction in group revenue directly attributable to this, we welcomed the new regulatory framework, as it is aimed at ensuring a level playing field across industry providers and increased transparency and fairer outcomes for customers.”
“Our operating licences in the United Kingdom, Australia, Cyprus, New Zealand, Israel, South Africa and Singapore, provide a strong foundation in this new environment and the benefits of a diversified revenue stream,” he added.
The firm reported a 55% fall in active customers to 101,634 over the final three months of 2018 after the rules came into effect.
Revenues in the final quarter rose 17%, against 65% growth over the full year.
Last month, Plus500 saw 48% of shareholders vote against pay plans for top bosses – with the firm only narrowly securing the majority needed.
Mr Elimelech and chief financial officer Elad Even-Chen will each be awarded a potential annual bonus of 1.8 million US dollars (£1.4 million) if profit targets are met, in addition to discretionary bonuses.