Business is nothing if not a dog-eat-dog world, as Playtech amply demonstrated today by snapping up struggling spread betting firm Plus500 for £459.6m, the gambling technology company’s second financial acquisition in as many months.
Plus500 has had a tough few weeks after the Financial Conduct Authority launched an investigation into its anti-money laundering procedures on May 18. The Israeli-based, London-listed trading firm had to suspend customer accounts while it asked for more documentation.
Its shares duly plunged from 750p to as low as 248p, wiping almost £600m off its value. They had recovered to 370p on Friday, 8.1% below Playtech’s offer of 400p a share.
Credit: Yahoo Finance
‘Such scrutiny has made it apparent that Plus500 has underestimated the challenges brought about by its rapid growth and would therefore benefit from being part of the Playtech Group,’ the Isle of Man-based mothership-to-be said in a stockmarket statement.
Playtech, which powers the online operations of gamers including Paddy Power, William Hill and Betfair, bought TradeFX, which also allows retail investors to punt on the financial markets via Contract For Differences (CFDs), for €208m in April. Not so coincidentally, TradeFX was owned by Playtech’s founder and largest shareholder, the Israeli billionaire Teddy Sagi.
At the time, Playtech chief exec Mor Weizer told Reuters, ‘We intend to offer TradeFX trading platform to all of Playtech's licensees and other gaming companies, given the fact that the trading platform is complementary to gaming companies' operations.’ In other words, betting on the markets is not so different to a flutter at the races.
Plus500 will fit neatly into this plan then, so long as it sorts everything out to the FCA’s liking and doesn’t lose a chunk of its customers in the process. Investors weren’t so sure: Playtech shares were down more than 1% to 816p in mid-morning trading. But the FTSE 250 company clearly wouldn’t have bought it if it didn’t think that was possible. And if its gamble pays off it may well have bagged itself a bargain.