You might think after all we’ve been through, that Wall Street would have wised up, cleaned house, reassured the public, restored investor confidence.
You’d be wrong.
As we mentioned a few weeks ago (The Sell Side Still Says ‘Buy’), it is still no better:
“Despite the corporate scandals and Wall Street stock-research legal settlement of the past few years, sell ratings are still a rarity at brokerage firms, accounting for just 9% of all ratings, according to Thomson Financial. And analysts who issue “sells” can expect intense criticism from brokers at their firm and investors. Particularly if, as was the case with aaiPharma, the company keeps exceeding earnings expectations and its stock keeps moving higher.”
That’s from a WSJ article “Street Sleuth: Lone Voice Was Right on aaiPharma.”
It seems the exchanges still allow companies to freeze out analysts who are less than effusive in their praises. This is simply uinconscionable. It must be incumbent upon the NYSE and the NASDAQ to force listed firms, as part of their listing requirements, to “not discriminate in the dissemination and distribution of material, via conference call or email, to any analysts who covers, rates, recommneds or tracks their company, REGARDLESS OF RATING.
By coincidence, the WSJ notes the Bullish analysts who covered aaiPharma (the subject firm of the article) also had a banking relationship with the company: “That analysts at firms with investment-banking relationships with aaiPharma were the among the most vocal bulls on the company may have been just a coincidence, says Jefferies’ Mr. Windley, “but it was a smelly coincidence, and one that’s particularly sensitive at this point.”
Keep repeating that to yourselves: “Just a coincidence.”
Street Sleuth: Lone Voice Was Right on aaiPharma
Raymond James Analyst Was Skeptical, and Wrong, Until Vindication Came
By JUSTIN LAHART and DAVID P. HAMILTON
WALL STREET JOURNAL, April 22, 2004