Israeli fintech and LSE-listed CFD broker Plus500 has announced a new share buyback program, which it believes will highlight the board’s confidence in the company, its financial strength, its prospects, and what the firm describes as “the significant operational and financial momentum achieved by Plus500 over recent years”.
Plus500 will spend as much as $70.0 million of its own money buying back LON:PLUS stock from investors.
The $70.0 million is made up of two components a final buyback tranche of $42.40 million, and funding for a special buyback totalling $27.60 million.
The company previously spent $60.20 million on stock purchases in the latter part of 2022. These purchases had, in turn, followed on from a $50.00 million special buyback program, which was announced in April last year.
Plus 500 is aiming to buy almost 10.0 million of its own shares
The company will look to buy just over 9.959 million of its own shares in the open market.
The timing and size of any purchases will be determined by the underlying share price and trading volumes, investment bank Jefferies has been appointed to manage the buyback process.
Plus500 is listed and traded on the London Stock Exchange and the stock has an average daily turnover of some 463,000 shares. The company’s market cap is currently around £1.66 billion.
This latest share buyback will run until completion, or December 31st this year, whichever comes soonest.
If we assume that Jefferies could buy back a quarter of the daily average volume. traded in Plus500, on any given business day, then the process could take several months or more.
Plus500 is not the only broker buying back its own stock
The Israeli brokerage is not the only stock in the sector that has been or is buying back its shares.
CMC Markets announced a share buyback program in 2022, the buyback, which was worth £30.00 million, was concluded by mid-October that year.
IG Group launched a £150.00 million share repurchase program in late July, which it subsequently extended by a further £50.0 million at the end of January this year.
The buyback is ongoing and as of the end of February, the firm has bought back just over 16.92 million of its own shares, at a cost of £133.90 million pounds.
Plus500’s stock price has outperformed those of its rivals over the last 12 months, rising by +28.63%. Compared to gains of just +2.45% for IG Group and +6.02% for CMC Markets.
By comparison, US-listed interactive Brokers saw their stock price rise by just under +26% over the last twelve months.
Plus500 share price versus IG, CMC Markets & Interactive Brokers
Source: Yahoo Finance
In a business that is notoriously cyclical spending surplus cash on stock buybacks could be considered questionable, particularly if, in a year or two’s time, the business finds that needs to raise additional cash.
One could also argue it suggests that management has run out of ideas about where to expand next, or how to grow the business from here.
On the other hand, management sees share buybacks as a way to reward shareholders, increase EPS and boost share prices.
The truth of the matter lies somewhere between those two standpoints.
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