Alon Gonen: We want to make Plus500 much bigger
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Short Plus Part 2: Bucket Shop Part 3: Customer Lifetime Value Part 4: Companies House Inconsistencies Part 5: Audit Opinions Part 6: Unlicensed Activity Part 7: Worldwide Web Part Unanswered Questions Part If Plus continues as a going concern, it still deserves a low multiple.
But there is a bull case. Indeed, the reported financials look almost too good to be true. Revenue has doubled two years in a row. The company has historically paid a significant dividend. There is just one small wrinkle:. This should be unsurprising given the dynamics of a bucket shop. To see this, consider the two key KPIs Plus publishes each quarter: A different visualization of the data makes clear that customers eventually roll off:.
Using the 26, customers active in Admission Document p. However, the proportion of accounts active each quarter has steadily declined as customers depart. A small portion of previously active accounts have returned in times alon gonen plus500 bitcoin significant market volatility, but to date the number of inactive customers, previously reported as new, has increased every single quarter.
Indeed, in the Admission Document, Plus admits that customers have a finite lifetime. Note that such a short customer lifetime is more characteristic of an online gambling operation than a reputable brokerage.
Among thecumulative accounts to date, includinginactive in Q1, approximately 99, are less than 18 months old, and therefore might yet still have capital available to trade. From this, we can calculate a going concern valuation of the business. Instead of capitalizing earnings at an arbitrary multiple, it makes more sense to alon gonen plus500 bitcoin about the lifetime value of the current customer base, in order to back into what the market is paying for potential future customers.
This is one-time, non-recurring turnover that should not be capitalized. Future growth depends on attracting new customers to the platform. In my opinion, if regulators carefully review the reporting inconsistencies highlighted in Part 4neither the monetization of the current customer base nor the acquisition of new customers should take place.
Supporters of Plus, in addition to making the obvious peer-group comparisons to CFD brokers with different, more sustainable business models, have very effectively countered a strawman short thesis.
Zack Buckley of Buckley Capital Partners distributed a widely circulated long pitch on Plus last year that effectively sums up the bull case. I am not aware of anyone whose short thesis on Plus has been based alon gonen plus500 bitcoin the assumption that alon gonen plus500 bitcoin May 15 dividend was not actually paid, as suggested by the company. There is an important distinction between the type of outright financial statement misrepresentation common among some of the more egregious Chinese reverse merger scams in recent years, and other alon gonen plus500 bitcoin of major business fraud.
For example, a CFD brokerage designed to capture customer deposits as revenue will alon gonen plus500 bitcoin real and substantial cash flow, while perhaps representing itself as being more reputable and customer-friendly. Enron and Worldcom both paid regular dividends.
Alon Gonen is already a very wealthy man. PwC is a reputable audit firm. In Part 5 I will discuss why there could still be issues with the financial statements. On to Part 4: Your email address will not be published. You may use these HTML tags and attributes: Leave this field empty. Join Cable Car's mailing list ignored if you are already a member.
They consider every deposit as revenue — and with a few exceptions this way of thinking seems to apply. The sum of those liabilities and segregated accounts grew from USD 37m to 40m during I alon gonen plus500 bitcoin with you in principle — Plus ultimately converts most customer alon gonen plus500 bitcoin to revenue.
However, the proportion may be a bit lower in any given period as anecdotally at least they do process some customer withdrawals. But your point stands.
Yes, they do process some withdrawals. Just, new deposits minus withdrawals equals net new money. Cable Car is registered as an investment adviser with the states of CA and TX and may be required to register in other jurisdictions where it does business in the future.
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There is just one small wrinkle: Customers run out of money. A different visualization of the data makes clear that customers eventually roll off: What is Plus worth as a going concern?
