LaBranche Taken to the Woodshed
Specialist trading firm LaBranche (LAB) saw nearly one-quarter of its market value vanish Friday in the wake of its grim bottom-line forecast.
The company warned late Thursday that it would post a $23 million loss for the second quarter due to a decline in its market-making business on the New York Stock Exchange. LaBranche said that adverse market conditions over the past two months dragged down profits.
At the 4 p.m. EDT close of trading, its shares had lost $3.02, or 24.3%, to $9.42.
Labranche's demise dragged down the other publicly traded specialist firm, Van der Moolen Holdings (VDM) 7.4% to $6.84.Labranche's warning doesn't bode well for retail trading with the online brokers. On Friday, E*Trade (ET) was down 68 cents, or 3% to $22.26, and TD Ameritrade (AMTD) was down 53 cents, or 3.6%, to $14.42. For the second quarter, Labranche said it returned to its losing ways. The company said its estimated $23 million loss includes a $5 million operating loss, or 8 cents a share. It also includes a noncash $17 million decline in the value of the firm's restricted shares in the NYSE Group (NYX), the parent company of the New York Stock Exchange. LaBranche, one of the largest and oldest specialist trading firms on the NYSE, said that during the quarter, principal trading revenue totaled about $20 million, down $47 million from the second quarter of 2005. Specialist firms, which earn commissions for matching buyers and sellers on an exchange, also make money from trades made to smooth out fluctuations in stock prices. The firms are permitted to make proprietary trades for their accounts, but not at the expense of any customer. The firm's earnings warning marks a return to the kind of lackluster performances LaBranche posted during much of the past two years. LaBranche broke that negative trend when it reported sharply higher profits in the fourth quarter of 2005 and the first quarter of this year. Ironically, most of LaBranche's first-quarter jump in profits stemmed from the sale of NYSE seats as part of the Big Board's merger with Archipelago.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV