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Strategies & Market Trends : The Thread -- Ignore unavailable to you. Want to Upgrade?

To: DebtBomb who wrote (29336)	1/21/2001 5:44:57 PM
From: AD	Read Replies (1) \| Respond to of 49816

Getty snaps at the analysts The pictures tycoon exposes to Neil Bennett the dirty tricks and sharp practices that investment banks used to fuel the technology bubble MARK GETTY should be pleased with the international capital markets. In the past five years they have provided the finance that has enabled him and Jonathan Klein, his partner, to build Getty Images into the world's largest photographic images group. Today Getty's company bestrides the photographic world just as his grandfather's did the oil industry. But Getty is deeply angry. Angry with the investment banks that he feels fuelled the technology boom to unsustainable levels and precipitated its collapse. Even angrier with the analysts within the investment banks, who he believes have abandoned any attempt to be objective stock pickers and have become powerful marketing tools for their employers. And most angry at the repeated incidents of barely concealed blackmail he and his company have been subjected to by analysts trying to win fees for their banks. Most company chiefs would not dare criticise the bulge bracket firms, or even their smaller imitators, for fear of reprisals. But Getty's comments hit home hard and carry even more weight, given his track record in business. Getty now believes that regulators such as the Securities and Exchange Commission in the US should act in the wake of the dotcom collapse to prevent broking analysts being used to generate investment banking fees. "Analysts have forgotten how to analyse business and they have forgotten how to be objective about them," he says. "In the past the analysts were the department you never saw. They were the nerds at school. You went to see the investment bankers and maybe the salesmen but the Chinese walls divided them from the analysts. "But new technology and the internet changed all that. The role of analysts in describing these things and their application became fundamental in the markets, so their role in the investment banks became all important. What I am critical about is the way they have become stars." Getty tells hair-raising tales of the pressure the analysts can put on companies to do business with their banks. "We have had tons of conversations with investment banks over the past few years where the analyst says: 'If you don't generate fees for us I am going to drop my coverage of your company'. "Coverage is an important issue for us. If the analysts stop covering us, suddenly our liquidity would dry up and the volatility of our share price would increase, which would make investors nervous. In the past few years we have had to carve banks into deals when they have done absolutely no work for us merely to keep them sweet. Even if we had an acquisition to do we would not have taken their advice anyway." So there is intense pressure on companies, even as large and as well known as Getty Images, to pay millions of dollars in broking and banking fees to keep the analysts on side. Getty admits this is mainly a US phenomenon but feels it has been imported to London by the US banks. Once a company hires an investment bank, the research then flows from the analyst. But Getty says the analysts' notes then bear little resemblance to a balanced outlook of a company's fortunes. "Investors are not being told the truth about companies and they should not rely on this analysis." Getty believes the damage these analysts have done by ramping share prices has been exacerbated by the star culture that grows up around some of them. Some investors follow certain analysts like teenagers would chase pop stars. "They behave like groupies towards the research stars they adore." As a result, the stocks they pick soar ever upwards until the inevitable collapse. Certainly, a great deal of damage has been done to investors' wealth in the past few months by the collapse of the technology bubble. Getty points out that Nasdaq has halved since its peak, wiping $2,000bn off share prices. Naturally, he stresses, you cannot blame any one group for such a cataclysmic slump - venture capitalists, entrepreneurs, auditors and day traders all played their part in the ludicrous overvaluation of technology stocks earlier in the year. But the banks have played a large role. The damage, he believes, has gone further than the publication of a few over-enthusiastic research notes from partial forecasters. Until recently, the investment banking system was geared to floating companies, any company, and then writing them up positively to move their share prices. "The amount of absolutely appalling companies that have come to market beggars belief. You could have floated the Titanic on the market six months ago. Yes, some banks will only float good companies. But others could not give two hoots if you have a business, a business plan or any business experience." Getty believes that now the boom has bust, steps should be taken to ensure it does not happen again. "The Chinese walls have to be rebuilt. The onus should be on the banks and their compliance officers to ensure the analysts are kept separate from investment banking and they should be punished for breaches. "First of all, more attention should be brought to bear on this issue and then a solution may come out of the woodwork. It's always a reaction to regulate when markets go down and I think it will happen this time round. It's pointless to blame people like day traders or entrepreneurs for the bubble because you cannot regulate them. You should place blame where you can do something about it, where you can regulate - the investment banks." telegraph.co.uk