Cohen & Co Inc. (COHN) stock intrinsic value fair value estimate & owner earnings analysis

WHAT THE BUSINESS IS Cohen & Company is a small Philadelphia-based financial firm with three businesses. Capital Markets is the main one. It combines a fixed-income sales and trading desk (corporate bonds and loans, mortgage-backed securities, TBAs, SBA loans, brokered CDs for small banks and more), a gestation-repo program that lends short-term to mortgage originators against pools of newly issued mortgage loans, and Cohen & Company Capital Markets (CCM). CCM is a boutique investment bank set up in 2021 that describes itself as one of the most active SPAC advisors on Wall Street, with a focus on frontier technologies, digital assets, energy transition and natural resources. Asset Management is small ($8.8 million of revenue in 2025) and manages about $1.4 billion, mainly European bank and insurance trust preferred securities, debt of smaller European, U.S. and Bermudian insurers, and commercial real estate loans; in March 2025 the firm agreed to sell its management contracts for several Alesco CDOs to Hildene Capital Management. Principal Investing holds investments the firm owns for its own return, and since 2019 SPACs and SPAC sponsor entities have made up a significant part of it. HOW WE MEASURED EARNINGS CCM is often paid in the shares and warrants of the companies it advises instead of cash. In 2025 it earned $141 million of cash fees and $232 million of fees paid in securities, and recorded $186 million of losses on securities it had received as fees. Reported operating cash flow leaves out fees paid in securities entirely, because they only turn into cash later, when the securities are sold. Its working-capital lines are also mostly the firm's trading inventory and repo book, not ordinary working capital. So we measured owner earnings starting from net income, and we did this the same way for every year from 2016 to 2025. Fees paid in securities count at their value on the day they are received, and every later gain or loss on them counts in earnings. Stock compensation is counted as a real cost. Any loss on the repo lending would also flow straight through net income, so no separate adjustment is needed for it. We measure earnings for the whole operating company. The listed company owned about 30% of the operating company's units at the end of 2025. Most of the rest is held by Executive Chairman Daniel Cohen and a family trust, and those units can be exchanged for cash or for one share for every ten units. We therefore divide by about 6 million share-equivalents rather than the roughly 2.1 million shares outstanding. The company's own diluted earnings per share for 2025 ($4.35) is lower than our figure because it deducts the income tax that would have been due if all units had been converted. We use the taxes the company actually recorded. THE RECORD Results swing between very good and very bad years. Owner earnings per share-equivalent were $4.05 in 2020 and $6.56 in 2021. They were -$5.66 in 2022, when principal investments swung from a $37 million gain the year before to a $29 million loss, then -$0.49 in 2023 and -$0.32 in 2024. In 2025 they were $6.93, as investment banking and new-issue revenue rose to $188 million from $41 million in 2024, including work for SPAC and digital-asset clients. From 2016 to 2019, before SPAC-related work became central, the firm averaged about -$0.19 per share, roughly break-even. Our starting level uses the six years since then (2020 to 2025). That period includes two strong years, three weak ones and a recovery, and both its median and its average are about $1.85 per share. We did not use 2025 alone as the level. The first half of 2026 shows the strength continuing (revenue $127 million versus $89 million a year earlier, diluted earnings per share $1.36 versus $1.00), but it does not prove a new normal for a business this cyclical. Owner earnings went from a small loss in 2024 to $6.93 in 2025; our base case starts at $1.85, far below that. BASE CASE ($17.40 per share): The firm earns its 2020 to 2025 average of $1.85 per share for ten years, with good years like 2021 and 2025 offset by bad years like 2022 to 2024. Earnings then fade to zero over the following ten years. We do not carry them further because the advisory franchise has only a five-year record, and the older trading business earned roughly nothing on its own from 2016 to 2019. All cases are discounted at 6%. BULL CASE ($34.44 per share): CCM keeps its position among the most active SPAC advisors and good years come more often. Earnings average $3.35 per share for ten years, which is the 2020 to 2025 average leaving out 2022's principal-investment losses, then fade to zero over fifteen years. The evidence is two strong periods in a row: 2025, which included $141 million of cash fees, and the first half of 2026, when revenue ran well ahead of the same period of 2025. BEAR CASE (-$6.66 per share): The next three years repeat 2022 to 2024, averaging -$2.16 per share. The firm then falls back to its pre-SPAC pattern of roughly breaking even (-$0.19 per share, the 2016 to 2019 average) through year ten, with nothing after that. The risks behind this case are in the filings. Much of 2025's income arrived as securities of SPAC and digital-asset clients, a concentration the company itself warns about, and the firm recorded $186 million of losses on such securities in the same year. Operating cash flow in the first half of 2026 was -$27 million. The firm also owes $48.1 million face value of junior subordinated notes due in 2035 and 2037, carried at a large discount, and had $7.1 million of 12% notes due during 2026. A negative bear value does not mean the company owes more than it owns: at the end of 2025 it had $103 million of total equity against $33 million of debt on its balance sheet. It means that in a long bust the business would use up capital instead of producing it, and shareholders would be relying on the balance sheet rather than on earnings. OTHER CONSIDERATIONS Daniel Cohen controls a majority of the votes through his common shares and two series of voting preferred stock, and the company is a controlled company under NYSE American rules, so other shareholders do not get some of the usual governance protections. Executives, including Mr. Cohen, redeemed small numbers of operating units for cash in 2024 and 2025. The company pays a regular dividend of $0.25 a quarter ($1.00 a year) and has added special dividends, including $2.00 per share declared in December 2025 and $0.70 declared in March 2026. The firm is very small, so results depend on a limited number of deals each year. WHAT WOULD MAKE THIS ESTIMATE WRONG The estimate would be too low if CCM's deal flow proves durable through the next downturn, making 2025 and 2026 the norm rather than a peak. It would be too high if the securities received as fees in 2025 and 2026 lose most of their remaining value, or if deal activity falls back to its 2022 to 2024 levels. MARGIN-OF-SAFETY PRICE The margin-of-safety price is $7.00, about 60% below the base case. The discount is large because the bear case is negative, earnings swing sharply with SPAC and deal activity, the company is very small, and one shareholder controls it.