Rodman & Renshaw: Mr Spitzer will see you now . . .

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
rating change.

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
York Times

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
was fired.

I have no position in of Halozyme
; In fact, before reading the article, I cannot even recall hearing of the company.


Halozyme Therapeutics (1 year)
click for larger chart


Source: Stockcharts


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)
Gretchen Morgenson

NYT, April 9, 2006   

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What's been said:

Discussions found on the web:
  1. Alaskan_Pete commented on Apr 10

    Rodman is a shady bunch. If you are really interested I can fill you in on a suspect PIPE, pump-n-dump dilution scheme they pulled off in another small Portland,OR biotech called AVI Biopharma (NASDAQ: AVII).

    The funny thing is, they managed to do it twice. and the second occurence was after R&R had been pegged for some other shady PIPE dealings. CEO of AVI presenting at R&R conference on using PIPEs, among other things. An ugly affair all in all, yet SEC is nowhere to be found….as usual.

  2. wcw commented on Apr 10

    I think it is the last we’ll hear of it. The SEC has too little funding and too much on its plate to chase unshortable junk like HTI. I don’t care who’s pumping it or who’ll be dumping it — but for any dozen names like this, nine will go right back whence they came.

    Full disclosure: I have no idea what HTI so much as does as a business. I just looked at the chart after reading the narrative and jumped to conclusions; said conclusions may well be incorrect.

  3. Brian commented on Apr 11

    I’m not a TimesSelect subscriber so I did not read the entire article but it is possible that this is the same Matt Murray that covered emerging Healthcare/biotech at Lehman’s Research Dept in the late 90’s while I was covering small-caps.

    If so, I would say that Matt had a solid reputation as a thorough analyst (as thorough as any of us were in 1998).

    It is amazing to me to see so many former analysts at major B/D’s relegated to working at 2nd, 3rd or 4th tier B/D’s. The revenue/pay model has changed so dramatically and so quickly that many of the best and brightest analysts can’t find a good platform to perform their analysis. I’ve read before (I think it was here on the big picture) that the quality of bulge bracket research has fallen off dramatically in the wake of Mr. Spitzer’s investigations.

    It seems like there might be a market void to be exploited by providing the right combination of independent analysts performing the highest quality research. Getting anyone to pay for that research (something the buyside takes for granted as “free” – I know they pay through trading, etc) would be the rub.

  4. danny commented on Apr 15

    sell side is fo’ suckas, fool!

  5. samsnead commented on Oct 11

    Wesley Clark of Rodman studied how to evade the regulators when he was on the BoD of Stephens Inc. He deserves to be banished from the industry for the rest of his life. But of course the SEC and NASD are nothing but a bunch of clowns, who would never do anything to really protect investors. Those are my opinions, based on facts I personally experienced.

  6. FrankQ commented on Jan 19

    What you have read here is an orchestrated smear campaign by an Analyst that was upset he was not chosen to be the Director of Research. In my opinion, this was all set up to exit a firm that hurt his ego & at the same time save his own reputation on the street.

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