Optionable Fortune Reversal: NYMEX More To Blame Than BMO

We received a few letters from readers wanting to know about the collapse in shares of Optionable Inc. (OPBL.OB), a provider of natural gas and other energy derivatives brokerage services. And though we were looking at a real nice growth story earlier in the year, the sudden reversal of fortune is really unfortunate.

It all started after the latest earnings conference call. Management assured investors that even if the company lost a pretty big client in the Bank of Montreal which accounted for nearly 30% of last quarter's revenue (and was potentially exposed to a greater degree depending on counterparty risk), it would still be able to replace that business with growth from its expanding trading derivatives business.

Though the market naturally began to price in the departure of a major client, it was still reasonable to believe at the time that Optionable would see growth elsewhere to replace some of the potential loss of BMO. For instance, during the conference call the company stated that it was gaining market share in crude oil derivatives, had grown its OPEX electronic trading platform and HQ Trading client base. In fact, just a few days later, the company announced record volume in the NYMEX Sweet Light Crude Oil contracts, representing nearly 11.2% of total NYMEX LO volume and 7.5% of which was traded through OPEX. Plus, Optionable still had NYMEX Holdings (NMX) in their back pocket with a 19% stake which was considered to be a huge vote of confidence in the company.

But that just didn't turn out to be the case. Though the Bank of Montreal did drop Optionable, the real killer was the abrupt departure of NYMEX and a move by them to offer options on the Globex electronic trading platform to compete with Optionable; a huge blow to business. That previously unforeseen move is ultimately what killed the company and helped to chop off more than three fourths of the stock's value.

OPBL.OB 1-yr chart:

Comments

[asaani]

I still think you guys are still prematurely writing off optionable too soon. As is always the case with traders are opposed to investors. This company is still a viable company. If management concentrates on growing the company, it can still compete and grow its client base through its Opex trading platform.

Only time will tell offcourse. As it is always the case, when the chips are down, traders head for the exits.
I have always known that, when a company is down and traders head for the exits, thats when you should really look at a company. Such was the case with Amylin pharmaceuticals. In 1998, amylin pharmaceuticals traded at less than a dollar. Today Amylin is trading at above $44.00/share. Invest in small companies for the long term. Stop trading companies for short term gains. If i'm proven right in the long run, I stand to make millions of dollars. Since going down to about 43 cens, I have decided to take a huge position in the company. I own 50,000 shares presently.