Company: COHN
Filing Date: 2025-11-06
Form Type: 10-Q
Source: 0001437749-25-033482
Chunk: 97

Company: Cohen & Co Inc.
Filing Date: 2025-11-06
Form: 10-Q
Item: Item 1
Chunk 97
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 in the SPAC market with many clients being SPACs or former SPACs.  In addition to earning new issue and advisory revenue in these engagements, we sometimes receive financial instruments as part of our compensation, and this increases our investment in SPACs and former SPACs.  

Equity prices of SPACs and post business combination SPACs are volatile.  We are exposed to public equity prices of SPACs and post business combination SPACs both through our other investments, at fair value and investments in equity method affiliates.  As a result, we may record significant principal transaction losses and equity method losses from time to time.

Margin Pressures in Fixed Income Brokerage Business 

Performance in the financial services industry in which we operate is highly correlated to the overall strength of the economy and financial market activity. Overall market conditions are a product of many factors beyond our control and can be unpredictable. These factors may affect the financial decisions made by investors, including their level of participation in the financial markets. In turn, these decisions may affect our business results. With respect to financial market activity, our profitability is sensitive to a variety of factors including the volatility of the equity and fixed income markets, the level and shape of the various yield curves, and the volume and value of trading in securities.

Margins and volumes in certain products and markets within the fixed income brokerage business continue to decrease materially as competition has increased and general market activity has declined. Further, we continue to expect that competition will increase over time, resulting in continued margin pressure.

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Our response to this margin compression has included: (i) building a diversified fixed income trading platform, (ii) acquiring or building out new product lines and expanding existing product lines, (iii) building a hedging execution and funding operation to service mortgage originators, (iv) building out CCM, (v) adding a SPAC equity trading team, and (vi) monitoring our fixed costs. Our cost management initiatives are ongoing. However, there can be no certainty that these efforts will be sufficient. If insufficient, we will likely see a decline in profitability.

U.S. Housing Market

In recent years, our mortgage group has grown in significance to our Capital Markets segment and our company overall.  The mortgage group primarily earns revenue by providing hedging execution, securities financing, and trade execution services to mortgage originators and other investors in mortgage-backed securities.  Therefore, this group’s revenue is highly dependent on