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To: CIMA who wrote (51878)	4/27/2000 6:06:00 AM
From: d:oug	Respond to of 116763

... to see congressional hearings into all the terrible things (A reduced copy of a post from another thread. Doug) StockTalk: Five Dollars and Under: THE GOLDEN LISTS From: CIMA Monday, Apr 24, 2000 Same $hit, different pile... Uncritical analysts are hyping stocks and the regulators are alarmed. Garth Alexander reports from New York ¸ High on hot air: World Online's Nina Brink, Merrill's Henry Blodget and Morgan Stanley's Mary Meeker have all played a part in the recent dotcom hype The tipsters who never say 'sell' Going down...but don't tell anyone INVESTORS were stunned last month when they discovered that Nina Brink, chairman of World Online, a newly floated Dutch internet group, had sold most of her 9.5% stake before the offer. What shocked them most was not that Brink had pocketed the money but that Goldman Sachs, one of America's top investment banks, which co-managed the float, had not made more of her actions and her apparent lack of confidence in the company in promoting the shares to investors. The Japanese government, horrified by the scandal, has now announced it may ban Goldman Sachs from participating in a series of privatisations that could have brought the firm hundreds of millions of dollars in fees. In the fiercely competitive battle for big underwriting deals, banks are resorting to practices that are alarming regulators. They are hyping stocks, encouraging companies to use creative accounting and, if they are venture-capital investors, dumping stocks as soon as the companies float. Individual investors often pay..... ... are completely misled..... One 30-year Wall Street veteran says: "It is the most corrupt thing I have ever seen. After the market crashes later this year or next, you are going to see congressional hearings into all the terrible things that have been going on." Arthur Levitt, the Securities and Exchange Commission (SEC) chairman, has repeatedly complained about..... ... Levitt says they "act more like promoters and marketers than unbiased and dispassionate analysts . . . a 'sell' recommendation from an analyst is as common as a Barbra Streisand concert". ... for internet businesses that are little more than concepts dressed up as companies." In their desire not to offend corporate clients, banks hardly ever put a negative rating on a stock..... Among those who have been pitching hardest for deals is Mary Meeker, Morgan Stanley Dean Witter's celebrated internet analyst. She played a pivotal role in winning a deal for Morgan Stanley to be the lead manager of Lastminute.com's float last month. Her exuberant report on the company was supposed to encourage investors. But the shares are now trading at less than half their flotation price. "Lastminute plunged and so did ArtistDirect.com, another IPO [initial public offering] she did a couple of weeks later in America. Because of their poor performance it has brought to light..... ... was a very odd set of circumstances - it was so blatant," says one banker. The reason for the change in the role of researchers is that, since broker fees were deregulated in 1975 and have shrunk to a fraction of what they used to be, analysts' huge salaries are increasingly being paid by the banking side of the business..... ... another increasingly common and deceptive practice of deliberately understating a company's expected earnings. ... It is naive and it is going to end badly." Another development that alarms old-timers..... ... the whole morality has changed... The huge "overhang" of restricted stock sold into the market at the end of lock-up periods in February and March was one of the big factors in causing the Nasdaq market to go into a tailspin. Bob Gabele, First Call's insider research director, says: "Sales of restricted stock hit $22 billion in February. Everyone was getting excited about the record $35 billion that investors put into mutual funds that month. But if you included the restricted stock sales with new IPOs there was actually a negative flow of money." For the investment banks it does not really matter if a new company lives or dies. They make their fees upfront on the flotation and, hopefully, on secondary issues. Underwriters earn fees of about 7%. Goldman Sachs is currently leading in the flotation league tables.....