Unacceptable Corporate and Market (NASDAQ) Behavior

My jaw dropped on the way into work this morning as I was reading an article by Gretchen Morgenson in the NYT:

For the 25 years that Tad LaFountain has been a technology stock analyst on
Wall Street, he has often written negatively about the strategies or prospects
of the companies he followed. Not once did a company retaliate, he said.

Until now.

Mr. LaFountain, who follows 21 semiconductor companies at Wells Fargo
Securities in New York, said yesterday that he was dropping coverage of the Altera
, an industry giant, because its executives had told him they
would not take his phone calls, would not let him ask questions on analyst
conference calls and would no longer give him the information he needed to
analyze its business.

Why the cold shoulder? According to Mr. LaFountain, the company objected to
his negative opinion on Altera stock. Before he withdrew his coverage, Mr.
LaFountain had a sell rating on Altera shares.

Writing his final report on the company yesterday, Mr. LaFountain said he
expected to replace Altera in his list of companies with one "that takes a more
appropriate view of the role of independent investment research."

I find that astonishing. If there’s a problem with this analyst’s work, than use the appropriate channels to complain about his work. But banning the guy from asking questions?

There are two major problems with this issue: First, it reflect poorly on management. Quite frankly, it smacks of the time Ken Lay Jeff Skilling called an analayst who had the temerity to question his numbers "an asshole." I don’t know about you, but I sure as hell don’t want to own any company whose management in any way shape or form reminds me of Kenny-Boy Lay. If ever there’s a reason to simply dump a stock, this is it.

Second, it makes me wonder what the hell the exchanges are doing; Isn’t there some minimal requirements — besides capitalization — that companies should have to meet in order to maintain their listing status?

Hey Nasdaq and NYSE! You wanna get on the ball with this please?


UPDATE July 27 7:57pm

Michael correctly notes in the comments that it was Skilling and not Lay who said that:

April 17, 2001: Raised eyebrows during an conference call with stock analysts and reporters.  Richard Grubman, managing director of Highfields Capital Management in Boston, asked to see Enron’s balance sheet and was told it would not be available until later. "You’re the only financial institution that can’t come up with balance sheet or cash flow statement after earnings," Grubman grumbled. "Well, thank you very much, we appreciate that. Asshole," Skilling replied. This incident would later be cited over and over as evidence of Skilling’s unsuitability as a CEO. Skilling’s explanation: "The specific fellow that I was not real happy with is a short-seller in the market. I don’t think it is fair to our shareholders to give someone a platform like that they are using for some personal vested interest related to their stock position." 

I stand corrected.



An Analyst Receives a Time Out From Altera
Published: July 27, 2005

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What's been said:

Discussions found on the web:
  1. Michael commented on Jul 27

    It was Jeff Skilling who called an analyst an A hole.

    Lay still is a crook, just classier.

  2. leewhee commented on Jul 28

    Don’t forget the guy from NFI (mortgage co) earlier this year calling an analyst a “dickhead” on the con-con call. He thought the call was over and the phone lines were shut down.


    I think signals like this matter. When a company has guys like this in senior mgmt (NFI, ALTR), it’s only a matter of time until the company tanks.

  3. Clarence commented on Jul 28

    Barry, Given your position “in the trade”…..why don’t you call the SEC, and ask them if a company can exclude an analyst, i.e. give interviews (and information, by definition) to _some_ analysts while excluding others. If the SEC says “ok by us”…you have a nice Wall St J op-ed piece, because it means that the company is not giving the same information to everyone. Then….take it to Eliott Spitzer. He has done more in five years to uncover corrupt business practices that the SEC has done in 50.

  4. jeff commented on Jul 28

    I don’t think we should expect that any company has an obligation to speak with an analyst… it’s not like investment banks are regulatory agencies. Maybe the guy was a jerk and the executives decided they would be better off not having this guy on their calls. The point is, you are positioning only one side of the story. Do you know for fact that ALTR didn’t go to Wells Fargo and take issue with the analyst?

    Also, there are at least 14 other firms covering ALTR. Let’s also not forget what analysts are doing, offering an opinion… this is quite different from what exchanges and the SEC are doing.

  5. jeff commented on Jul 28

    sorry for the double comment, Typepad in general has been acting really strange and very slow for the last couple of days.

  6. Clarence commented on Jul 28

    jeff, Reasonably, you can’t tell a company’s execs to talk to Mr X. However, my understanding is that they ARE obliged to make all relevant information public, i.e. NOT to tell Morgan Stanley today…..and you next week. In the real world, if a company talks to analysts in private, they WILL give out useful information (why else would the analysts want to chat?) before it is given to the general public. The point is: SEC regs require full disclosure of all relevant information. Private meetings with “our” analysts excluding others defeats that goal.

  7. Barry commented on Jul 28

    If you are a public traded company, you should have to disseminate information to all parties at once.

    Not only that, but it raises questions about the appearance of improprietary — its is more than just looking unseemly.

    I have a problem with any public company not proactively assisting the investor and/or anaysts community. If you don’t want to speak to investors or analysts or fund mangers — stay private.

    Give no quarter to weasels, liars and potential criminals

  8. Clarence commented on Jul 28

    Barry, Then……take this to the SEC, write a column for the Wall St Journal, and call Spitzer’s office. YOU have the credibility to be heard. Do it !

  9. jeff commented on Jul 28

    the article was clear that the company was not excluding him from the analyst calls, but that they wouldn’t take his calls or allow him to ask questions (not sure how they were going to accomplish that). Insofar as giving him information to analyze their business, that could be another way of saying “you will only have what has been made publicly available.” The ‘relevant information’ distinction is deliberately broad.

    I’d be really surprised if ALTR didn’t run this by company counsel to get opinion on how to do this legally before blacklisting the guy.

    Barry, I’m biased because I’ve been on the other side of these calls so I don’t find it that outrageous that a company would not want to speak with an analyst. Not speaking with a shareholder is a different matter altogether, but in this case it is clear that they were excluding the analyst.

  10. leewhee commented on Jul 29

    ALTR issued a “mea culpa” today. Guess they received a hailstorm of complaints and the firestorm was not productive.

    Just because an analyst may be prickly or you disagree with his analysis, it’s not a sound business decision to exclude him or her no matter whether “you’ve been on the other side of these calls” or not.

    In my experience, companies that generate testy relations like this are ones to prune from your portfolio. Much easier to let it go and deal with things professionally no matter what an analyst does or says.

    And excluding an analyst because he downgrades your company is just adding fuel to the fire.

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