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Technology Stocks : InfoSpace (INSP): Where GNET went! -- Ignore unavailable to you. Want to Upgrade?

To: Roger Sherman who wrote (26350)	7/20/2001 5:43:51 PM
From: Puck	Respond to of 28311

Merrill Settles Claim Against Web Analyst By Mary Kelleher and F. Brinley Bruton NEW YORK (Reuters) - Merrill Lynch and Co. Inc. (NYSE:MER - news), the No. 1 U.S. brokerage, paid $400,000 to settle allegations that overly bullish research by its top Internet analyst, Henry Blodget, caused a client to lose his shirt, and the investor's lawyer on Friday vowed to go after other high-profile Wall Street analysts. ``We are now looking at Mary Meeker and Jack Grubman,'' said Jacob Zamansky of the New York law firm Zamansky and Associates, who represented the investor in arbitration proceedings at the New York Stock Exchange (news - web sites). ``We have clients that have asked us to bring claims.'' Analysts who made ill-timed calls on stocks that cost investors money in the high-tech bust need not worry too much, experts said. The case against Merrill was an arbitration proceeding and cannot set legal precedent, they said. The plaintiff had originally asked for $10.8 million in damages and losses Still, the settlement opens the floodgates for disgruntled investors looking for scapegoats and financial redress. ``Copycat litigation is a very frequent event,'' said Jack Coffee, a Columbia Law School professor. ``This particular success is likely to draw a lot of imitation. There are a lot of other investors who can say the same thing as this investor did.'' Meeker, who once was known as the ``Queen of the Internet,'' is Morgan Stanley's (NYSE:MWD - news) top Web analyst. Grubman is top telecom analyst at Citigroup Inc.'s (NYSE:C - news) Salomon Smith Barney brokerage unit. ANALYSTS' STARS HAVE FALLEN Morgan Stanley declined to comment, while Salomon Smith Barney, for its part, said: ``Our analysts provide a very valuable service.'' Grubman and Meeker were not available to comment. Meeker and Grubman are among high-profile analysts whose stars have fallen as their stock picks slumped. They have been accused of putting out overly upbeat research reports and touting companies that gave their firm other business such as loans or stock offerings. Wall Street in June agreed on a set of ethical guidelines to prevent such conflicts. Lawyers at another Wall Street firm were puzzled Merrill settled the complaint. Merrill might have been embarrassed by the case, Coffee speculated. ``When they change their position from stonewalling to settling at 80 cents on the dollar, you have to think something made them feel very vulnerable,'' Coffee said. ``There could have been some embarrassment that occurred in the initial stage ... that made this a weak case to defend.'' Merrill Lynch did not admit to any wrongdoing. ``The matter was resolved to avoid the expense and distraction of protracted litigation,'' a Merrill Lynch spokesman said. All claims with respect to Blodget as well as Blodget himself were dismissed from this case, the spokesman said. Zamansky represented Debasis Kanjilal, a New York pediatrician who said he lost $500,000 in his Merrill account after his InfoSpace Inc. (NasdaqNM:INSP - news) holdings cratered. Kanjilal had earmarked the money for his daughter's New York University tuition, he told Reuters in an interview. NEWFANGLED STOCK VALUATION Blodget had been bullish on InfoSpace, even as it started slipping from its record high of $132 in March 2000. The stock closed at $3.29 on Thursday. Kanjilal also invested in JDS Uniphase Corp. (JDU.TO) on Merrill's recommendation and allegedly lost an additional $300,000, the claim said. The claim said Blodget came up with newfangled ways to value stocks, that inflated the prices of stocks and helped Merrill win investment banking business from companies. ``Blodget 'cheerleads' for Merrill Lynch's investment banking division and applies newly minted 'valuation criteria' to reach valuation levels to justify widely inflated price targets and 'buy' recommendations for Internet and technology companies with no profits expected for years,'' the claim said. The analyst's use of new valuation methods to justify high price targets become known on Wall Street as ``Blodgeting'' a stock, the claim said. Wall Street has come under fire for putting buy recommendations on stocks in order to win lucrative business helping companies with mergers or selling stock to the public. Firms adopted the ethical guidelines to deflect criticism that there are holes in so-called Chinese Walls between research and investment banking units, said James Cox, a professor of corporate and securities law at Duke University. ``What I sense the industry is trying to do with recent pronouncements is they are just trying to get ahead of the curve before the NASD does something, and possibly Securities and Exchange Commission (news - web sites) investigates,'' Cox said. Merrill was not part of the group of Wall Street banks that helped InfoSpace go public in 1998 and consequently had no direct interest in making that stock price rise. But Merrill investment bankers did advise another Web company, Go2Net, which InfoSpace bought last year, and consequently had a potential conflict of interest, the arbitration claim alleged. ``Merrill Lynch stood to lose its huge investment banking fees if InfoSpace's stock price fell before the deal closed -- a material fact which was never disclosed to claimants,'' the claim alleged.