rande , blodget getting some heat... i really do hope more cases come up. there will also be some lawsuits for mismanagement <spending companies money on parties, ect..>
Henry Blodget news-> All-Star Analyst Faces ArbitrationAfter Internet Picks Hit the Skids
March 2, 2001
All-Star Analyst Faces Arbitration
After Internet Picks Hit the Skids
By Charles Gasparino
Staff Reporter of The Wall Street Journal
Oh, Henry.
A year ago, Merrill Lynch & Co. Internet analyst Henry Blodget was on top of the world, dubbed "King Henry" as the Nasdaq Stock Market and his favorite picks reached new heights.
Now, with the Nasdaq mired in a deep bear market, Mr. Blodget is catching guff for steering investors wrong on Internet stocks. In the latest move, a Merrill investor alleged in an arbitration case that Mr. Blodget maintained a "buy" recommendation on an Internet stock to support a financing deal for his firm.
Mr. Blodget, 35 years old, declined to comment on the case. "I try at all times to be helpful" to clients, he said in an interview, adding, "The only way to succeed is to create the highest level of integrity and credibility." Merrill says it will fight the claim, calling it "totally without merit."
Mr. Blodget is far from the only Internet analyst who got it wrong. Indeed, the case comes as some investors gripe about being misled into buying Internet shares by a broad range of Wall Street firms and their analysts, most of whom had "buy" recommendations on stocks until long after they began sliding. A number of Internet stocks have plunged 90% or more from their highs last year.
But it is unusual for an analyst to be taken to task in such a case. "There have been rare instances where an analyst has been named in an arbitration proceeding," said Samantha Rabin, a vice president at Securities Arbitration Commentator, a Maplewood, N.J., research firm. "But as a result of the tremendous media exposure resulting from some of the analysts' recommendations, this could signal the beginning of more to come."
In the case, filed with the New York Stock Exchange, Debases Kanjilal, a 46-year-old pediatrician, contends that he bought shares of InfoSpace Inc. in March 2000 through his Merrill broker and maintained the position despite the stock's decline based on Mr. Blodget's "buy" recommendations. Mr. Kanjilal later had a loss of more than $500,000 as the stock crumbled, the claim says.
Mr. Kanjilal bought about 4,600 shares of InfoSpace last March at a split-adjusted price between $122 and $133 a share, according to his lawyer, Jacob Zamansky, a New York securities attorney. Mr. Kanjilal's claim, which names Mr. Blodget, Merrill and his broker, says he wanted to sell his InfoSpace shares after they had fallen to about $60 a share in May. But he says he didn't because his broker told him to hold on.
He also says in the arbitration filing that his broker, Michael Healy, later told him he had spoken directly to Mr. Blodget and that Mr. Blodget said he continued to be bullish on the stock, with a price target of $100 a share. Merrill says Mr. Healy has no comment, but the company says Mr. Healy never told Mr. Kanjilal he spoke to Mr. Blodget. InfoSpace, of Redmond, Wash., was down nine cents at $3.72 a share Thursday at 4 p.m. in Nasdaq Stock Market trading.
Mr. Kanjilal asserts that Mr. Blodget had a reason to provide overly optimistic projections, because they would help Merrill's investment-banking business -- and Mr. Blodget's paycheck. (Analysts' pay increasingly is based in part on the amount of investment-banking business generated by the firm.) Last summer, Merrill had been retained as a financial adviser for another Internet company, Go2Net Inc., which InfoSpace purchased in July for about $4 billion. The acquisition would have been jeopardized, the arbitration case says, if shares of InfoSpace fell before the deal closed.
"Blodget's recommendations lacked a reasonable basis in fact and Blodget failed to disclose a serious conflict of interest with the company whose stock he was touting," the arbitration filing said.
Merrill disputes the assertion, saying Mr. Blodget only learned about the transaction days before the deal was announced, and his next research report on InfoSpace reflected the firm's relationship with Go2Net. Merrill's goal "is to have the highest-quality research for retail and institutional clients," the firm said in a statement, adding that InfoSpace was "branded very risky by the Merrill rating system." |
