TechFinancials’ Stock Collapses on 24Option Departure
Online binary options platform provider TechFinancials saw its shares crash after an announcement during its results trading update that it lost one of its major white label partners. Executives for TechFinancials noted that the company had delayed paying out dividends after it became official that 24Option, one of the company’s biggest clients, has decided to stop using TechFinancials’ platform in favor of its own.
The result was a more than -30.00% drop in share prices as investors reacted in a panic. The company did some damage control, noting that first quarter results would be unharmed, but did acknowledge that the outlook for the remainder of the year would be challenging. Nevertheless, TechFinancials has made some moves to mitigate the damage, including diversifying its offers and onboarding several other white label partners.
Bad News Leads to Bad Day on Trading Floor
Despite an overall positive update, TechFinancials saw its London-listed shares spiral down after revealing that one of its major clients had chosen to stop using the company’s platform. Richfield Capital, which operates the website www.24option.com, has elected to take their trading platform and related services in-house, leaving TechFinancials to fill a hole left by what was one of their largest and most important customers.
The change comes as 24Option seeks to gain more control of its services, leading to a split with TechFinancials. The platform provider noted that its 2016 earnings would not be affected by the change. The company is expected to report revenues of $21.0 million, while EBITDA is set to tally in at $2.8 million. Nevertheless, TechFinancials warned that the damage would likely become evident in the company’s earnings for 2017.
The company did note that it had foreseen the possibility of 24Option defecting, and had begun to work to mitigate the potential loss of what in 2015 accounted for roughly 30.00% of the company’s platform revenues, or 15.00% of total revenues. TechFinancials has been working to diversify their portfolio by onboarding new white label clients, as well as expanding into new regions. Moreover, the company even launched their own online binary options brokerage, OptionFair. Regardless, the company will be hard pressed to fully replace the losses from 24Option’s departure over the short-term.
What it Means
The loss of its major client means that TechFinancials’ will be forced to shift its strategy, and will absorb a heavy hit over the near-to-medium term. The company already announced that it will halt its dividend payout pending a deeper review of the impact of the loss in revenues. While first quarter earnings are unlikely to be hurt—the departure will only become official on April 1st—full year revenues will likely bear out the full hit to TechFinancials’ bottom line.
Moreover, the news proved catastrophic for the company’s London-listed shares. Following the news, TechFinancials stocks nosedived by a whopping 3-0.00% on Tuesday. The drop led to two consecutive 5-minute price monitoring extension periods, and though shares have recovered somewhat since then, they remain far below previous levels.
In the long-term, TechFinancials is likely to largely mitigate the damage thanks to its growing expansion and signing of new clients. However, the company could be facing a growing trend as more companies look to take their trading platform services in-house to avoid white-label deals that force them to share revenues with providers such as TechFinancials.
The company could also face problems over the medium-term as the ongoing clamp down on the binary options industry across Europe and other regions continues to force companies to drastically reevaluate their business models and in some cases even close their doors.
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