LaBranche's ( LAB) bullish take on the Big Board is trampling the specialist firm's stock.

LaBranche plunged 24% in a single day last week after it warned of a $23 million second-quarter loss. The setback comes as the New York firm's business of trading stocks on the floor of the Big Board comes under increasing pressure from cheaper electronic traders.

But the warning also highlights the risks LaBranche took by sitting out the NYSE Group's ( NYX) $1.5 billion secondary offering this past spring. Observers say LaBranche, which holds $210 million worth of NYSE stock, effectively doubled its bet on its troubled trading business by passing up an opportunity to cash out and invest elsewhere.

"It seems like a lot of shares for the company to hold, and it does not seem like a prudent thing to do on their part," says Tim Ghriskey, chief investment officer at Solaris Asset Management and former LaBranche shareholder. "The market is their business, so certainly their investment leverages them even more to their business."

The NYSE's March merger with electronic exchange Archipelago seemed to put LaBranche in the catbird seat. The trading firm's 39 NYSE membership seats turned into 3.1 million NYSE shares, worth nearly $300 million at one point.

The NYSE duly rolled out a secondary offering that gave insiders a chance to realize gains. But while other NYSE holders rushed to cash in, LaBranche sat tight, citing tax considerations.

In doing so, the firm left on the table some $60 million it could have invested or returned to shareholders. And with NYSE shares falling 13% in the second quarter, LaBranche's hold call is now hitting shareholders right in the pocketbook: Some $17 million of the latest-quarter loss comes from a writedown of the value of LaBranche's NYSE stake.

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