Henry BLODGET Is Back Selling Internet Moonshine:
Mark Gilbert
Nov. 3 (Bloomberg) -- Henry BLODGET, who paid a $4 million fine in 2003 to settle allegations that he published ``materially misleading'' research, is back peddling Internet moonshine.
Never mind that the National Association of Securities Dealers, the U.S. Securities and Exchange Commission and the New York Stock Exchange barred him for life from the securities industry. The former Merrill Lynch & Co. analyst is free to pen ``securities research and opinions so long as the conclusions are not tailored to the circumstances of particular clients,'' according to the Web site of BLODGET's Cherry Hill Research firm.
Sure, the rules may allow it. Reading BLODGET's views on the likes of Yahoo! Inc. and Amazon.com Inc., though, is akin to hearing former Enron Corp. Chief Executive Officer Kenneth Lay lecture on accounting, or former Tyco International Ltd. CEO L. Dennis Kozlowski comment on executive perks. The skin crawls. The hackles rise. It all seems a bit surreal.
BLODGET, remember, is the guy who had a public ``buy'' rating on InfoSpace Inc., at the same time as calling the maker of Internet search software a ``piece of junk'' in a private e- mail unearthed by New York Attorney General Eliot Spitzer. InfoSpace traded at about $1,305 at the start of March 2000, and was valued at $113 by December of that year.
Spot the Difference
Compare BLODGET's statement that ``the growth and profitability of Yahoo, EBay and Amazon are the envy of most traditional media and retailing companies,'' with his claim that Internet sales are ``an incredibly powerful economic trend affecting every industry, and it's not something that investors can ignore.''
The former is from an article by BLODGET in the Guardian newspaper last week. The latter is BLODGET quoted by Bloomberg News in April 2000. You can't slide a cigarette paper between the thoughts of BLODGET the analyst and BLODGET the hack.
BLODGET's rehabilitation began last year, when he covered Martha Stewart's trial for Microsoft Corp.' s online magazine, Slate. It's not clear who instigated the relationship. BLODGET says on the magazine's Web site that ``Slate asked me.'' The New York Post in November 2003 cited Slate editor Jacob Weisberg as saying BLODGET proposed the assignment.
`Born Suckers'
The deal BLODGET cut with his prosecutors came with the all- too-common caveat of not admitting or denying the accusations. His return seems to lack the humility you might expect from someone who became a symbol of the incestuous relationship between investment banking and equity research. His recent writings for Slate, for example, taunt the reader with the title ``Born Suckers -- the greatest Wall Street danger of all: you.''
There's even what looks distinctly like an appeal for sympathy. BLODGET says in one Slate piece that he ``greedily shoveled'' $700,000 into Internet stocks and technology funds in February and March 2000, ``minutes before the bubble burst. Most of these funds have essentially gone to zero. I would love to say I lost this money because I was swindled. Alas, I lost it because, in hindsight, I was a moron.''
To be fair, BLODGET wasn't an indiscriminate apologist for the industry he covered. ``Seventy-five percent of all Internet companies will cease to exist in the next three to five years,'' BLODGET said on Feb. 22, 2000. Three weeks later, the Nasdaq Composite Index posted a record closing high of 5048 points -- and slumped more than 70 percent in the following three years.
Alive and Kicking
Moreover, he continually stressed his view that trying to make quick wins from Internet stocks was a dangerous game. Asked for an investment recommendation on Sept. 14, 2000, BLODGET cited Yahoo and Amazon as stocks that ``will be around in five years and trading at significantly higher values.''
BLODGET was half right. Both companies are alive and kicking, though Yahoo stock trades at about $38, compared with more than $53 at the time of his prediction, while Amazon stock has dropped to about $40 from $45.
BLODGET has a right to make a living. He's clearly a talented scribe, and has a knack for self-publicity that time out of the limelight hasn't diminished. Couldn't he turn his talents to writing about sports or art, though? Or politics, given his undoubted insight into how power corrupts?
He's clearly gagging to dish the dirt about what really happened during his time at Merrill Lynch, saying in March that ``I would love to discuss all this directly.'' His settlement with the authorities precludes him from discussing the case.
Still Cheerleading?
Cherry Hill Research says on its Web site that BLODGET is its president. It's developing a service ``focused on Internet business and finance. The service will likely include proprietary research and analysis, as well as detailed financial models, industry data and other analytical tools. We are not currently charging for access to the service, but we plan to eventually.''
Doesn't that sound pretty darned similar to how BLODGET earned his living in his former, disgraced role as a stock-market cheerleader for Merrill Lynch?
The key distinction -- as long as he's not making ``buy'' or ``sell'' recommendations to particular clients, he's free to say whatever he likes -- may seem pretty marginal to anyone who lost a chunk of their savings in the irrational exuberance BLODGET was partly responsible for stoking. Shouldn't ``banned from the securities industry for life'' have a broader meaning?
To contact the writer of this column:
Mark Gilbert in London at magilbert@bloomberg.net.
Last Updated: November 2, 2005 19:08 EST |
