Oppenheimer's profit drops 75% and shares fall 20%; wealth arm holds up

Oppenheimer Holdings owns Oppenheimer & Co., a broker-dealer and investment adviser based in New York.¹ It has 88 retail branch offices in 25 states and, at September 30, 2026, employed 3,009 people, 926 of them financial advisors.² It reports two main businesses. Wealth Management earns commissions on client trades, fees on the assets it manages, and income from sweeping clients' idle cash into bank deposits.³ Capital Markets earns investment-banking fees for underwriting stock and bond sales and advising on mergers, plus revenue from trading with institutional clients.⁴ The traded shares are Class A stock, which has no vote; 99,665 Class B voting shares make up the rest.⁵

The year began with a legal bill. In April 2026 the company agreed to pay $70 million to settle a class action over what it paid on client cash in its bank sweep program.¹ It paid the money into escrow on June 8, 2026, and the court gave final approval on September 17, 2026.² The second quarter was strong: revenue was $454.9 million, firm-wide investment-banking revenue was $84.3 million, and net income was $27.4 million.³ For all of 2025, revenue was $1,638.1 million and net income was $148.4 million.⁴ The fourth quarter of 2025 alone earned $74.4 million, helped by incentive fees from sponsored hedge funds that beat their prior highs.⁵

The charge at the center of this quarter comes from stock appreciation rights the company grants its financial advisors. Each right pays the rise in the share price above a set strike price, vests five years after it is granted, and is paid in cash.¹ Because the rights are paid in cash, the company carries them as a liability and remeasures them to the share price every quarter, so a rising stock means a bigger expense.² At September 30, 2026, 2,376,087 rights were outstanding, with an average strike of $54.52 and about 3.0 years left.³ The company changed its formula in 2026 to grant fewer rights, but says it will take several years for the change to show fully.⁴ Its adjusted figures leave this expense out, even though the company itself calls the remeasurement recurring.⁵

Oppenheimer's results move with markets and interest rates. Lower rates cut what it earns on client cash in the sweep program.¹ The Federal Reserve raised its target range by a quarter point, to 3.75% to 4.00%, in September 2026.² For dealmaking, the chief executive said raising capital was largely out of reach for smaller companies during the quarter.³

Revenue for the third quarter of 2026 was $382.0 million, down 10.0% from $424.4 million.¹ Pre-tax income fell to $8.8 million from $31.6 million, and net income fell 75%, to $5.5 million from $21.7 million.² That is $0.52 a basic share and $0.47 diluted, against $2.06 and $1.90 a year earlier.³ Chief executive Robert Lowenthal called the earnings disappointing and named lower retail trading, fewer banking deals and the higher cost of the advisor rights.⁴ The tax rate rose to 38.5% from 31.4%, because costs that cannot be deducted weighed more on a smaller profit.⁵

The advisor-rights charge was $21.0 million, up from $13.5 million a year earlier.¹ It grew because the stock rose $12.42 in the quarter, to $117.96, against an $8.14 rise in the same quarter of 2025.² The charge is a paper cost for now, but it turns into cash when each batch of rights vests.³ Adding it back, pre-tax profit was about $29.8 million, against about $45.1 million a year earlier on the same basis.⁴ The company's adjusted net income was $20.9 million, or $1.96 a basic share, against $31.7 million, or $3.01. That drop of about 35% means the weak quarter is not only an accounting story.⁵ Adjusted diluted earnings were $1.81 a share, against $2.77.⁶

Capital Markets did the most damage. Its revenue fell 29.7% to $114.0 million, and it lost $9.9 million before tax after earning $12.3 million a year earlier.¹ Its investment-banking revenue fell about 60%, to $29.8 million from $75.0 million.² Fees for underwriting stock sales fell 82.0%, to $8.7 million from $48.3 million, and merger-advisory fees fell 8.4% on fewer deals.³ Bond trading revenue fell 23.8%, partly because the bonds the firm held lost value, while stock trading revenue rose 14.7%.⁴ The unit cut its pay costs 25.1%, which was not enough to keep it profitable.⁵

Wealth Management, about 70% of revenue, held up better. Its revenue rose 2.5% to $266.2 million.¹ Advisory fees, charged on managed assets, rose 15.3%. Retail commissions fell 13.9% as clients traded less, and sweep income fell $2.8 million on lower short-term rates.² Pre-tax income still fell 11.0% to $55.6 million, as the unit's pay costs carried $21.0 million of rights expense against $13.5 million a year earlier. Its pre-tax margin slipped to 20.9% from 24.1%.³ Managed assets reached a record $59.6 billion at September 30, 2026, and that figure sets October's advisory billing.⁴ Over the past year, market gains added $6.2 billion to those assets, while clients took out a net $1.7 billion. The advisor count was 926, against 927 a year earlier.⁵

The rights now weigh on the balance sheet too. Their liability was $95.0 million at September 30, 2026, up from $49.3 million at the end of 2025.¹ Their expense year to date was $68.1 million, against $19.0 million a year earlier.² At the September 30 price, the rights were in the money by about $151 million in total, counting the share price minus the average strike, times the rights outstanding; the $95.0 million liability is lower partly because rights still vesting are expensed over time, and that unbooked cost (it was $29.5 million at the end of 2025) still reaches earnings even if the stock stands still. At $85.92, that falls to about $75 million.³ The company warns that share-price moves can cause significant increases or decreases in this expense. The line has turned into a credit before: about $2.7 million in the first quarter of 2025.⁴ In both the second and third quarters of 2026, each dollar of share-price gain came with about $1.5 million to $1.7 million of rights expense, but that figure also includes cost booked as unvested rights vest, so a lower price would not reverse it dollar for dollar.⁵ The batch closest to vesting, 529,727 rights with a $49.57 strike, had 98 days left at September 30 and will be paid in cash. At $85.92, its gain would be about $19 million.⁶

Year to date, revenue rose 10.0% to $1,282.0 million.¹ Net income fell to $12.2 million, or $1.14 a basic share, from $74.0 million, or $7.05.² The $70 million settlement and the rights expense explain most of that gap. Leaving both out, adjusted net income was $114.1 million, or $10.68 a basic share, against $88.1 million, or $8.39.³ The company expects the settlement to be fully tax deductible.⁴ With $1.07 of diluted earnings a share after nine months, the fourth quarter needs about $1.93, above the third quarter's $1.81 adjusted, so our YES rests mostly on the rights charge turning into a credit if the stock stays well below $117.96 at December 31, plus fourth-quarter performance fees, which depend on fund returns after hedge-fund assets lost $443 million in value in the third quarter.⁵

Oppenheimer's borrowing is short-term and secured. Its 2025 annual report shows it had already paid off $113.1 million of senior secured notes.¹ Bank call loans were $222.3 million at September 30, 2026, up from $76.8 million at the end of 2025 but down from $349.9 million at mid-year.² These loans are payable on demand and the banks have not committed to keep them in place. The largest daily balance this year was $447.2 million.³ Repurchase agreements, which borrow cash against securities, were $1,021.7 million.⁴ The company held $38.0 million of cash, and its company-owned life insurance had a cash surrender value of $116.2 million.⁵ The broker-dealer's regulatory net capital was $477.9 million, which is $441.5 million above the required minimum.⁶

Operating cash flow so far this year was an outflow of $112.7 million. That includes the $70 million settlement payment and a $237.1 million rise in money lent to customers.¹ Debt-to-earnings ratios fit a broker poorly, because its borrowing is matched against client and trading assets. The better tests are the net capital cushion and how much depends on demand loans.² One risk to watch: the two largest margin accounts held $679.0 million, or 42.0% of all margin loans; the share is down from 43.8% at mid-year, but the amount is up from $659.7 million.³

On October 29, 2026, there were 10,611,540 Class A and 99,665 Class B shares.¹ Diluted shares averaged 11,586,145 in the quarter, with 877,120 added by share awards. The advisor rights are paid in cash, so they add cost, not shares.² The company bought back no stock in the first half of 2026 or in the third quarter, and 451,601 shares remain under its buyback authority.³ The board kept the dividend at $0.20 a share, payable November 27, 2026, to holders of record on November 13, 2026. At $85.92 that is a yield of about 0.9% a year.⁴ Cash dividends paid so far this year were $16.7 million, which included a $1.00 special dividend, about $10.5 million, paid January 9, 2026. Stockholders' equity reached a record $991.1 million.⁵

Several other items will shape later quarters. In October 2026 the company chose not to renew its 85 Broad Street headquarters lease, so it must move when that lease ends in February 2028.¹ The company expects the move to need significant capital spending and to add a material new lease asset and a matching lease liability to the balance sheet. In July the company said it would likely move to a smaller space.² After the quarter ended, it bought C$7.3 million ($5.2 million) of shares in a financial-technology company from existing holders and put C$1.0 million ($0.7 million) into new shares, lifting its stake to about 44%.³ That company supplies much of the software used in Oppenheimer's clearing operations. A second closing is expected in January 2027, and the deals could require Oppenheimer to consolidate the company's results.⁴ Wider tax limits on deducting executive pay start on January 1, 2027; had they applied in 2025, income tax expense would have been about $7 million higher.⁵ Beyond what it has accrued, the company puts reasonably possible legal losses at up to $3 million, and it faces open inquiries from securities regulators.⁶

The market's verdict was harsh. The stock fell 20.3%, from a $107.77 close on October 29 to $85.92 at the October 30 close, while the S&P 500 fund fell 1.8%, from $769.49 to $756.¹ It traded at $103.81 at 9:35 a.m., before falling to the $85.92 close.² Piper Sandler's stock fell about 7% that day, and Raymond James fell about 2.5%.³ The stock had already slipped before the report, from $122.06 on October 5 to $100.06 on October 19.⁴ At $85.92 the company is worth about $920 million, or about 0.93 times its $92.53 book value a share and about 1.13 times its $75.89 tangible book value. The rights liability alone equals about 10% of that market value.⁵ At $85.92, the price is also below the $89.19 at which the stock began the second quarter.⁶ Our price file begins with a $119.58 close on September 15, 2026, so we cannot confirm the range over the past year.⁷

The bull case starts with the steadier business. Wealth Management still earned $55.6 million before tax in the quarter, and record managed assets of $59.6 billion set the base for fourth-quarter fees.¹ Adjusted earnings year to date, at $10.68 a basic share, are ahead of last year's $8.39.² The rights charge that hurt this quarter could run the other way if the stock stays near $85.92, which is $32.04 below the price that set the September liability.³ The fourth quarter usually carries performance fees, and in the fourth quarter of 2025 hedge-fund incentive fees helped net income reach $74.4 million.⁴ Banking is not shut: Oppenheimer was the last-listed of five joint bookrunners on Aspen Neuroscience's initial public offering, announced in a release dated October 29, 2026, with expected gross proceeds of about $140.6 million, though the release gives no fee or share for any bank.⁵ The stock also trades below book value, with $441.5 million of excess net capital.⁶

The bear case, strongest point first. The core business weakened even before the charge, since adjusted earnings per share fell about 35%.¹ Banking fees depend on a market the chief executive says was largely closed to smaller companies.² The rights keep the share price inside the income statement: a rebound brings the charge back, and the $95.0 million liability is paid in cash as rights vest.³ Hedge-fund assets the firm oversees lost $443 million in value in the quarter, which could thin fourth-quarter incentive fees.⁴ The firm also leans on uncommitted demand loans and a concentrated margin book, and it faces a costly headquarters move.⁵

The company's own forward goals are modest and long-dated. It grants fewer rights under the 2026 formula, with the full effect taking several years.¹ It is building a platform in Switzerland, and it says it may grow by buying businesses or raising its stakes in minority investments, as it just did with the software company.²

The dates to watch start with the dividend: record date November 13, 2026, and payment November 27, 2026.¹ The 529,727-right batch vests about 98 days after September 30, the second software-company closing is due in January 2027, and the new tax limits begin January 1, 2027.² The annual report is due in February 2027, and it will be the company's first as a large accelerated filer.³ The case that the third quarter was the low point would be wrong if the stock climbs back above $117.96 by year end, which would bring back a rights charge, or if banking revenue stays near the third quarter's $29.8 million. The fourth-quarter results and the annual report will show which.⁴

Neither the 10-Q nor the release gives a backlog of signed underwriting or merger deals, so a fourth-quarter banking rebound cannot be sized from the filings. The Aspen offering shows deals are still pricing with Oppenheimer as a bookrunner.

We found no call transcript and no analyst note that explains why Oppenheimer's stock fell much further than Piper Sandler's on the same day.

The filing gives no table of how much the rights expense moves with each dollar of share price, and the answer depends on where the stock ends the year.

No rent, size or capital-spending figure is given for the new headquarters, and the company says there is no assurance a lease will be signed on the terms it has in mind.

The filing does not name the financial-technology company or give its revenue or profit, so the effect of consolidating it cannot be judged.