Is it possible that Wall Street — or at least some parts of it — failed to learn much from the Eliot Spitzer led investigation into biased Research reports?
That’s the question that
the NYT’s Gretchen Morgenson asked this weekend, involving a smaller B/D’s research department. According to the Times, a a veteran analyst and portfolio manager named Matthew Murray was hired by Rodman & Renshaw "to help the firm expand its equity research, sales and trading operation."
Murray recommended a stock named Halozyme last September at
$1.86, with a $2.88 price target. Murray’s employer, Rodman & Renshaw, was part of a banking group that raised $17.5 million for the company in a public stock offering.
Since then, the stock hit $3.00. (It opened at $3.25 today) I think you can guess where this is going:
First, Mr. Murray said, he called the chief financial officer of Halozyme, to
confirm that there were no new developments at the company. Then he asked the
four members of Rodman’s investment policy committee to meet to discuss his
The next day, a Saturday, he received an e-mail message from Michael G. King
Jr., the research director at Rodman, suggesting that he maintain his rating on
Halozyme by raising his price target. "If you’d like some help regarding how to
finesse the price target on HTI your conversation should be had with me," Mr.
King wrote, referring to the company, in the e-mail message. Mr. Murray provided
a copy of the message to The New
In a return e-mail message, Mr. Murray said he was not interested in
finessing the price target. He did, however, agree to meet on Monday, Feb. 27,
with the chief financial officer from Halozyme to assess its fundamentals once
more. Rodman was about to be host for a series of meetings for Halozyme with the
firm’s clients. While many meetings like this are related to a securities
offering, this one was not.
Halozyme shares hit $3 that day. Having confirmed his previous investment
thesis in his meeting with the C.F.O., Mr. Murray submitted his downgrade
report. Mr. King, citing what he called the "abysmal" quality of the writing in
the report, advised the analyst that the report could not go out. Mr. Murray
asked to convene a meeting with the investment policy committee, to no avail. No
report has been published.
On Feb. 28, Mr. Murray sent the first of two e-mail messages to William A.
Iommi, Rodman’s head of compliance, asking that the firm remove his name from
coverage of Halozyme. All analysts must certify that their reports truly reflect
their opinions, and because Mr. Murray’s previously issued buy recommendation no
longer reflected his view, he said he should not be held accountable for it. On
Thursday, March 2, Mr. Iommi told the firm’s employees that Mr. Murray was
leaving its research department. "In his new role at Rodman, he will be
exploring the creation of an asset management business for Rodman & Renshaw
Holding," Mr. Iommi wrote in an e-mail message. Twelve days later, Mr. Murray
I have no position in of Halozyme
Therapeutics; In fact, before reading the article, I cannot even recall hearing of the company.
Halozyme Therapeutics (1 year)
click for larger chart
And, I am not all that familiar with Mr. Murray, or Rodman & Renshaw, or their research director, Michael G. King
Jr., or their head of compliance, William A.
Iommi. But the way the NYT explains what happened, its apparent that someone there is a weasel — and I don’t think its Mr. Murray.
I will hazard to guess that we haven’t yet heard the last of this story . . .
Did Wall Street Really Learn Its Lesson? (subscription only)
NYT, April 9, 2006