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HUB24 share price hammered after responding to media reports

The HUB24 Ltd (ASX: HUB) share price has returned to trade this afternoon following its trading halt and has sunk deep into the red.

At the time of writing the investment platform company’s shares are down almost 6% to $10.67.

What has happened?

This morning HUB24 requested a trading halt whilst it prepared a response to an article in the AFR.

That article implied that the Reserve Bank’s cash rate cut would result in account holders in investment platforms, such as those operated by HUB24 and Netwealth Group Ltd (ASX: NWL), earning negative returns on their cash.

This would be due to a combination of falling cash rates, administration fees, and the indirect impact of gross profit margins on accounts.

HUB24 response.

This afternoon HUB24 responded to the article and refuted many of its claims.

It said: “HUB24 maintains flexible fee arrangements with licensees for their clients. The fee example referenced in the article is not representative of the administration fees paid and interest rates received for the majority of our clients.”

It also explained that its cash account offering supports a broad range of services, such as investment trading, portfolio rebalancing and pension payments. Furthermore, it provides users with a variety of additional cash investment options including term deposits, cash ETFs, and cash management funds for advisers and clients seeking cash risk/return exposure.

The company then defended its cash transaction account, which it believes offers competitive interest rate when compared to peers and when compared to similar bank products.

Management pointed out that “all clients of HUB24 are receiving a positive interest rate on their cash account, post yesterday’s RBA rate change” and that the “comparison to a savings account from a major Australian bank is flawed, [as] it refers to a 5-month introductory rate of 2.20% which subsequently reverts to 0.30%.”

Elsewhere in the industry today, the Netwealth share price is down 6% and the Praemium Ltd (ASX: PPS) share price has fallen by 2.5%. It appears that some investors are still concerned by the media report despite HUB24’s response this afternoon.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Hub24 Ltd and Praemium Limited. The Motley Fool Australia owns shares of Netwealth. The Motley Fool Australia has recommended Hub24 Ltd and Praemium Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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