A Reuters report on Tuesday fanned hopes that broker-dealer LPL Financial Holdings Inc (NASDAQ:LPLA) may put itself up for sale. Shares leaped as high $34.35 before closing at $33.01, up 6.86%, on a volume of 3.60 million.
LPL Financial is the largest independent broker-dealer and registered investment advisory firm in the United States. It served nearly $502 billion in advisory and brokerage assets as of end-August, 2016. Advisors associated with LPL also serviced an estimated 45,000 retirement plans with an estimated $124 billion in retirement plan assets, as of June 30, 2016.
Reuters said LPL Financial is working with Goldman Sachs on the transaction, and that other companies as well as PE firms had evinced interest.
LPL Financial Holdings Inc (NASDAQ:LPLA) in new regulatory and difficult interest rate environment
Shares of LPL Financial have been trending downwards since the beginning of this year. One reason has been the apprehensions that the Department of Labor’s new rule requiring brokers to be ‘fiduciaries’ i.e. act solely in the best interest of their client, would be difficult, unprofitable and expensive to implement.
In February, LPL CEO Mark Casady warned of heightened market volatility and continued pressure on brokerage sales.
In April, Goldman Sachs downgraded LPL Financial to Sell from Neutral citing the aforesaid fiduciary regulation, slowing revenue growth and expensive relative valuation.
Shares of LPL Financial fell from $46.49 in December 2015 to a low of $14.90 in February 2016, but have recouped a lot of those losses in the following months.
In August, Credit Suisse downgraded the company from Outperform to Neutral.
In September, analysts at Morgan Stanley initiated coverage on LPL with an Underweight rating.
Over the past five quarters, revenue at LPL Financial has remained essentially flat at around $1.02 billion to $1.09 billion. Net income has ranged from $26.81 million to $50.39 million during that period.
LPL and Goldman Sachs refused to comment on the Reuters report, which cited people familiar with the matter and who asked not to be named.