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Non-Tech : Monetizing Shareholder Ignorance -- Ignore unavailable to you. Want to Upgrade?

To: Giordano Bruno who wrote (25)	7/24/2000 8:03:00 PM
From: patron_anejo_por_favor	Respond to of 26

Mark Maremont of the WALL STREET JOURNAL captures the essence of how investment bankers conspire with brokerage research departments to MONETIZE SHAREHOLDER IGNORANCE. This is a major article, Pulitzer Prize caliber, IMO: Message 14099311 Wall Street's honeymoon with Vignette started with Goldman and H&Q, which put money into the software start-up 10 months before its IPO. Both banks wanted to take Vignette public, says the company's chief executive, Greg Peters. But Vignette chose Morgan Stanley Dean Witter & Co. to lead the offering, partly because the company wanted Morgan Stanley's star Internet analyst, Mary Meeker, to publish research on the stock, Mr. Peters says. Goldman bowed out of the offering, while H&Q stayed on as a secondary underwriter. When Morgan Stanley put $1.5 million into Vignette in late 1998, Ms. Meeker was closely involved in the decision. She "was obviously very positive" about the investment, says Mr. Peters. "That's why they did it." Morgan Stanley spokesman Raymond O'Rourke confirms Ms. Meeker was involved in the bank's investment but says "she didn't make the decision unilaterally." Ms. Meeker declines to comment. Boosting the Stock Vignette's stock quickly soared from its split-adjusted IPO price of $3.17. The swift rise caused Ms. Meeker to be cautious at first about the company in her published research. She became more bullish as 1999 wore on and Vignette's revenues beat projections, although the company was still losing money. In January of this year, she and a colleague heralded Vignette's "knockout" fourth quarter of 1999 in a report headlined, "They crushed the nums." Morgan Stanley was required by securities regulations to hold its Vignette stake for a "lockup" period of a year after the offering. In March, a month after the lockup ended, and just two weeks after the stock briefly touched its peak of $100, the bank sold half of its Vignette shares for about $76 a split-adjusted share, or $41.2 million. That was a 5,400% gain in just over a year. While Morgan Stanley was selling, Ms. Meeker was telling investors to buy. She rated the stock "outperform," the second-highest ranking on her firm's four-point scale and a rating she had maintained since the prior July. The bank's research reports included a standard footnote, saying Morgan Stanley or its employees "have or may have a long or short position or holding" in the securities mentioned. Vignette shares closed Friday at $48.0625, 37% below the price at which Morgan Stanley sold in March. The bank's remaining stake is now valued at about $26 million. Morgan Stanley's Mr. O'Rourke denies any connection between the firm's positive rating on Vignette and its decision to sell half of its own stake. "We have been a long-term investor in Vignette, so no one should be surprised that we would eventually sell part of our position," the spokesman says. He says that the sale came 15 months after the venture investment and eight months after the bank's research department first urged investors to acquire the stock. Unbelievable!!!