good or bad for CMKX (CMKM Diamonds)?
NEW YORK (Dow Jones)--Last month's stock-trading activity mostly slowed from January's pace at online broker Ameritrade Holding Corp. (NasdaqNM:AMTD - News) and at trade- processing firm Knight Trading Group Inc. (NasdaqNM:NITE - News) . But Knight's numbers showed that the firm had stepped up its trading of more-obscure stocks.
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These are companies whose shares trade not on high-profile markets like the New York Stock Exchange (News - Websites) , but on lesser-known venues such as the Pink Sheets and the Over-the-Counter Bulletin Board. Last month, such trading averaged about 6.9 billion shares a day at Knight, a stock and options trading firm in Jersey City, N.J., compared with daily averages of about 3.8 billion shares in January and 769 million shares in February of last year.
Interestingly, a big chunk of Knight's overall stock-trading last month came from one single Pink Sheets tiny-priced stock, CMKM Diamonds Inc. Knight traded an average of about 3.36 billion CMKM shares a day, representing more than 40% of Knight's average daily share volume for the month.
CMKM describes itself as "a new company involved in the exploration for diamonds in the Canadian province of Saskatchewan." The company, whose stock trades on the Pink Sheets under the CMKX symbol, trades "at prices in the hundredths of a cent," Knight said.
According to the Pink Sheets Web site, a whopping 762.36 million shares of CMKM had recently traded Friday. The last sale price shown for the stock was 0.0001.
Asked why so much of Knight's business last month came from one little-known stock, Knight spokeswoman Margaret Wyrwas said, "the stocks that we trade represent what our clients are buying and selling." She declined to comment further.
A representative for CMKM said he couldn't account for the stock activity. "I can't tell you why we're having such a huge volume in trading."
More broadly, Knight's growing OTCBB and Pink Sheets business gave pause to one Wall Street analyst. Daniel Goldberg, who tracks Knight for Bear Stearns, said in a note that such stocks were "low margin" and that he believed "this will exert further downward pressure on (Knight's) revenue capture per share."
Wyrwas said that Knight viewed its dollar-volume figures as "the most meaningful statistic," more so than revenue capture per share. In February, Knight's average daily dollar volume fell by nearly 18.5% from what Wyrwas said were "January's extraordinary levels," but rose by 91% from a year ago. February's dollar volume was "in line" with the monthly averages seen in the fourth quarter, Wyrwas added.
Knight's revenue capture per share numbers weren't immediately available.
Knight shares were recently up 18 cents, or 1.5%, at $12.22. Over the past 52 weeks, the stock has traded as high as $17.27, on Jan. 21, and as low as $3.88 on March 31 of last year.
Overall at Knight, February's average daily trade volume dropped by 17.8% from January but climbed by 78.9% from February 2003. Daily average share volume rose both from January and year-earlier levels.
But that increase was largely due to the rise in OTCBB and Pink Sheets trading. Knight's share volume in Nasdaq and in listed stocks fell from January to February. Market performance in February was mixed, with the Dow Jones Industrial Average advancing and the Nasdaq Composite Index losing ground.
"The market generally considers February to be a weak month, and this February held to that expected pattern," said Knight Chief Executive Thomas Joyce, in a statement.
(Goldberg said he didn't own Knight shares. Bear Stearns didn't disclose any investment-banking ties to Knight.)
Ameritrade Adjusts Earnings Expectations
Separately, Ameritrade raised the bottom end of its earnings expectations for the second fiscal quarter and the entire 2004 fiscal year, which ends in September.
The Omaha, Neb., firm now expects to earn 16 cents to 19 cents a share in the second quarter ending in March and 56 cents to 79 cents a share for the full 2004 fiscal year. The top end of the projections didn't change, but the bottom end was lifted. Last month, Ameritrade expected earnings per share could fall to as low as 13 cents for the second quarter and to 53 cents for the full fiscal year.
Ameritrade's February trading activity rose by 97% from year-ago levels, but was down by 22% when compared with January.
Ameritrade's updated earnings projections came a day after news that three of the company's units were fined $10 million by the National Association of Securities Dealers for allegedly extending credit to clients in an improper manner. Ameritrade, which didn't admit or deny wrongdoing, had said that the fine wouldn't affect its earnings because the firm accrued for it in previous periods.
Ameritrade was recently off 16 cents, or 1.1%, at $14.53. During the last 52 weeks, the shares have risen to as high as $17.67, on Jan. 21, and have dropped to as low as $3.83, on March 12 of last year. -By Gaston F. Ceron, Dow Jones Newswires; 201-938-5234; gaston.ceron@dowjones.com
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