Gee ! If you pay for the research, it better be good(g)
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Posted by: Vacationhouse
In reply to: None Date:6/15/2007 1:29:40 PM
Post #of 146470
Equity research for sale
dealscape.thedealblogs.com
Four years after Analystgate, equity research may be more biased than ever. Wave Systems Corp., which makes software for PC security, is one of a growing number of publicly traded companies that are buying analyst research after being unable to rouse the attention of Wall Street's major brokerage houses. But what about that sweeping legal settlement a few years ago that was supposed to scour the investment industry of tainted research?
Indeed the historic 2003 pact did require brokerages to sever ties between their banking and research operations. Look at what has happened since 2003. Today there are scores of research firms for hire, such as Dutton Associates, that for a fee will write research on a company lacking analyst coverage. Wave is one of those companies, but it is by no means alone. Its problems attracting market interest exemplify a growing problem for small tech players, who are left hurting for attention amid an exodus of sell-side analysts to hedge firms, mutual funds and other buy-side investors.
"I am probably the poster child for an area where the investment market has not yet recognized a new sector being formed," says Steven Sprague, president and CEO of Wave, which makes computer security software. Although the PC industry last year shipped 50 million PCs equipped with the security technology provided by Wave and other companies, not a single Wall Street brokerage has issued a research report on this fast-growing sector. Says Sprague, "We are still waiting for Wall Street to get it."
He concedes that the research it pays Dutton to produce is not independent, but notes such analyst are critical in raising Wave's visibility. "If they write something you don’t like, you can fire them," he says bluntly. "It is what it is. It’s certainly an avenue available to companies that are not getting covered elsewhere." —Andrea
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