Futu Holdings Ltd. (FUTU), an online brokerage and wealth management platform, has plunged 25.63% in the premarket trading session and is trading at $49.83 at the time of the writing. The dip has come after the Chinese authorities warned unlicensed online brokerages, like Futu, that they are breaking the law. On Wednesday, FUTU closed the day at $67.02 after steadily declining 0.81% during regular trading hours.
Reason for decline
On Wednesday, a Chinese central banker said that the online brokerages that are not licensed in China are conducting illegal business if they serve Chinese clients via the internet. Sun Tianqi, head of the Financial Stability Department of the People’s Bank of China, said that cross-border online brokerages are driving in China without the driver’s license and hence, are conducting illegal financial activities. After the announcement, the companies like FUTU are at the risk of facing regulatory issues in near future. Fearing the outcome, FUTU stock has faced a sharp dip in the share market.
FUTU anniversary celebrations
FUTU announced on Wednesday that it would celebrate its 9th anniversary on 29th October. The company extended its business globally from 2012 to 2021. During the current year, i.e. 2021, it officially entered the Singapore market and provided the investors of the country the premium investment services. Users from around the world are sharing their Futu Stories while celebrating their anniversary.
Q2 2021 financial highlights
On 31st August, FUTU reported the financial results for the second quarter of the fiscal year 2021 which ended on 30th June. The company generated total revenue of $203.1 million during the quarter, an increase of 129.3% when compared with the same quarter of 2020. The total costs for the period were $35.9 million which depicts an increase of 81.3% when compared with the same period of 2020. The gross profit for the three months was $167.1 million which depicts an increase of 143.2% from the same period of 2020. The total operating expenses were $83.4 million, an increase of 145% when compared with the same period of 2020. The net income during the three months was $68.7 million, an increase of 125.8% when compared with Q2 2020.
Mr Leaf Hua Li, Futu’s Chairman and Chief Executive Officer of FUTU commented on the results that the company is pleased to see its operating metrics recording robust growth during the quarter. Going forward, the company is committed to defending its leading position in Hong Kong and would further improve profitability and operational flexibility.
What’s ahead for FUTU?
During the last three months, FUTU has declined more than 30% on the fears of facing regulatory issues in the PRC. Based on the latest development, it could be assumed that FUTU stock could face hot waters in future to come.