COHN Stock Price Increases Over 40% Pre-Market: Why It Happened

By Amit Chowdhry ● March 3, 2021
  • The stock price of Cohen & Company Inc. (NYSE American: COHN) is trading at over 40% pre-market. This is why it happened.

The stock price of Cohen & Company Inc. (NYSE American: COHN) – a financial services firm specializing in fixed income markets and in SPAC markets – is trading at over 40% pre-market as of 8:25 AM ET. Investors appear to be responding to the company reporting financial results for its fourth quarter and full-year ended December 31, 2020.

These are some of the highlights:

– Net income attributable to Cohen & Company Inc. was $14.8 million, or $7.64 per diluted share, for the three months ended December 31, 2020, compared to $1.7 million, or $1.19 per diluted share, for the three months ended September 30, 2020, and $0.8 million, or $0.56 per diluted share, for the three months ended December 31, 2019. Adjusted pre-tax income was $23.8 million, or $4.64 per diluted share, for the three months ended December 31, 2020, compared to $3.6 million, or $0.78 per diluted share, for the three months ended September 30, 2020, and $1.7 million, or $0.75 per diluted share, for the three months ended December 31, 2019. 

– Revenues during the three months ended December 31, 2020 increased $44.5 million from the prior quarter and $50.3 million from the prior year quarter.

– The increase from the prior quarter was comprised primarily of (i) an increase of $1.1 million in net trading revenue primarily from increased revenue in the company’s Gestation repo and Corporate trading groups, (ii) an increase of $2.2 million in asset management revenue primarily related to an incentive allocation earned by the manager of the company’s SPAC funds, (iii) an increase of $1.2 million in new issue and advisory revenue related to European insurance asset origination, and (iv) an increase of $39.8 million in principal transactions revenue primarily related to the closing of the company’s sponsored insurance SPAC in October 2020. On October 13, 2020, Insurance Acquisition Corp. completed its merger with Shift Technologies, Inc. (NASDAQ: SFT).

– The increase from the prior year quarter was comprised primarily of (i) an increase of $5.8 million in net trading revenue primarily from increased revenue in the company’s Gestation repo and Corporate trading groups, (ii) an increase of $2 million in asset management revenue primarily related to an incentive allocation earned by the manager of the company’s SPAC funds, and (iii) an increase of $42.1 million in principal transactions revenue primarily related to the closing of the company’s sponsored insurance SPAC in October 2020.

– Compensation and benefits expense as a percentage of revenue was 35% for the three months ended December 31, 2020, compared to 50% for the three months ended September 30, 2020 and 38% for the three months ended December 31, 2019. The number of company employees was 87 as of December 31, 2020, compared to 87 as of September 30, 2020, and 94 as of December 31, 2019.

– Non-compensation operating expenses during the three months ended December 31, 2020 increased $0.3 million from the prior quarter and decreased $0.8 million from the prior year quarter. The increase from the prior quarter was due primarily to revenue-driven third-party marketing costs related to European origination revenue. The decrease from the prior year quarter was primarily due to lower travel and entertainment, subscriptions, professional fees, and revenue-driven third-party marketing costs related to European origination revenue.

– Interest expense during the three months ended December 31, 2020 was comparable to the prior quarter and decreased $0.3 million from the prior year quarter. The changes in quarterly interest expense are primarily driven by fluctuations in interest on redeemable financial instruments, which are driven by certain company groups’ revenues and profits.

– Loss from equity method affiliates during the three months ended December 31, 2020 decreased $1.1 million from the prior quarter and increased $0.1 million from the prior year quarter. The decrease in loss from equity method affiliates was primarily related to expenses incurred in the prior quarter by the company’s sponsored insurance SPAC.

– During the three months ended December 31, 2020, the company recognized an $8 million U.S. net income tax benefit, which was primarily the result of the reduction in the valuation allowance applied against the company’s net operating loss and net capital loss tax assets. The company will continue to evaluate its operations on a quarterly basis and may make further adjustments to its valuation allowances going forward. Future adjustments could be material and could result in additional tax benefit or tax expense.

– As of December 31, 2020, total equity was $101.4 million, compared to $48.8 million as of December 31, 2019; $27.8 million of December 31, 2020 total equity was non-convertible non-controlling interest.

KEY QUOTE:

“We are pleased with our fourth quarter and annual results, and are excited for the year ahead as we continue to execute on our strategic goals, including growing our Mortgage and Repo businesses, expanding our asset management revenue streams, and positioning the company to attract new business opportunities and capital partners. Net trading revenue was $73.6 million in 2020, up $35.4 million or 93% from 2019, primarily from our Mortgage, Repo, and Corporate trading groups. At the end of the year, our Gestation Repo book had grown to $3.3 billion, up from $1.3 billion at the end of 2019, and our non-CDO assets under management increased 27% to $712 million, including growth in our European PriDe Funds and SPAC Funds.”

“We also continue to make strides in the development of our SPAC franchise and remain active in the SPAC market as a sponsor, asset manager, and investor. In the fourth quarter, our first company-sponsored SPAC, Insurance Acquisition Corp., closed its merger with Shift Technologies, contributing $18.3 million to the quarter’s adjusted pre-tax income. More recently, our second company-sponsored SPAC, INSU Acquisition Corp. II, closed its merger agreement with Metromile, a digital insurance platform and pay-by-mile auto insurer, and our third company-sponsored SPAC, INSU Acquisition Corp. III, completed its $250 million IPO and is currently seeking a business combination. Our team has substantial experience in the SPAC space, and we are excited to build on our momentum and continue growing our SPAC franchise. Looking ahead, we remain committed to executing on our strategic priorities, with a continued focus on proactively managing our risk and our capital structure, and on enhancing stockholder value.”

— Lester Brafman, Chief Executive Officer of Cohen & Company

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.