Mr. Blodget had no idea his own firm had pitched its investment-banking expertise to GoTo.com (www.goto.com ) when he issued his latest report and recommendation, Merrill says.
I'm pretty certain he knew something was up. He may not have known exactly what, but the typical approval delays that accompany research for stocks with potential deal exposure would have tipped him off that something was potentially in the works. Additionally, intraday downgrades are not that common, especially for him.
Merrill, which declined to make Mr. Blodget available for comment, says the analyst issued the report because GoTo.com's stock price had soared.
This is hardly convincing when you consider that Blodget had a 12-18 month price target of $18-19 on GOTO. According to Merrill's research guidelines and assuming the $19 target, GOTO no longer qualified for a long-term Buy rating above $15.84 and a near-term Accumulate rating above $17.28. Yet, rather than downgrading the stock, Blodget was recommending GOTO well above $19:
From May 22, 2001 report
Others we are recommending are Homestore (HOMS, D-1-1-9, $34) and GoTo (GOTO, D-2-1-9, $23). [emphasis added]
GOTO management probably viewed the $18-19 as really attractive.<G>
One of Merrill's selling points was Mr. Blodget's bullishness on InfoSpace. InfoSpace shares were trading at around $55, but Mr. Blodget believed they were undervalued. His share-price target: $100.
If I were GNET management I would have asked why was the price target only $100. It was $175 a few weeks earlier. |
