Tory donor Peter Cruddas loses £200m as his City broking firm CMC crashes sparking fears pandemic day trading boom could be over
Tory donor Peter Cruddas and his wife saw £200million wiped off their paper fortune after his City broking firm warned the pandemic-inspired day trading boom could be over.
CMC Markets performed spectacularly well during the Covid crisis, boosted by workers sitting at home with increased saving pots and more time on their hands than ever.
But yesterday the online platform – set up by Cruddas in 1989 with just £10,000 – said trading activity had plummeted during the summer months following on from a slow first quarter.
CMC Markets – set up by Peter Cruddas (pictured) in 1989 with just £10,000 – said trading activity had plummeted during the summer months
As a result, the firm slashed profit forecasts for the year to between £250m and £280million, a big fall from the £330million it was targeting as recently as July.
CMC also reported a dip in customer retention, a vital measure as investment platforms seek to hold on to new clients who flocked to them during lockdowns.
The company said retention dipped below its 80per cent minimum target. The update saw shares crash 27.4 per cent, or 115p, to 305p.
That slashed the value of the 57 per cent stake held by Cruddas by £190million to £504million. His wife Fiona also lost out as the value of her 3 per cent stake fell by £10million to £27million.
The company said: ‘Reduced volatility in markets has resulted in lower trading activity across both the newly acquired and existing cohort of clients.
‘Similar trends have been seen across our non-leveraged and leveraged businesses.’
The update came just a couple of months after Cruddas, 67, pocketed a £55million dividend from CMC’s soaring profits in 2020.
Once dubbed the richest man in the City, Cruddas was born and brought up on an East End council estate and left Shoreditch Comprehensive with no qualifications.
The father-of-four has at times controversially also strayed into politics. He was made a Conservative peer by Boris Johnson last year.
It later emerged he donated £500,000 to the Tories just days after being elevated to the House of Lords.
Cruddas was appointed co-treasurer of the Conservative Party in 2011 but later resigned amid a cash-for-access row.
His business boomed during the pandemic when as many as 1.8m adults in the UK are estimated to have become day traders.
Analysts, however, warned the craze could be drawing to a close as people return to offices, restaurants, pubs and shops.
Stuart Duncan, at Peel Hunt, said: ‘CMC cannot escape the slowdown in trading activity.’ He added the decline was down to ‘reduced volatility, fewer reasons to trade, and clients taking holidays as restrictions have eased’.
Last month, CMC rival Hargreaves Lansdown cautioned that the pandemic surge in trading would not last, sending its shares down 11 per cent on the day.
Hargreaves was off 0.2 per cent, or 3p, at 1512.5p yesterday, while IG fell 11 per cent, or 104p, to 841p.
The Conservative Party is keen to build on Margaret Thatcher’s legacy of a shareholder democracy, but others are worried young people could be losing money.
Hargreaves has said almost one quarter of clients – 55,900 customers – added this year were younger than 30.
A blue-chip stockbroker said: ‘Traditional brokers like us are openly jealous that these firms have been able to attract this new audience.
But questions do need to be asked about what these young people are doing on these platforms. Are they being protected?’
Cruddas has previously stated that all his new clients understand the risks they are taking.
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