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Unacceptable Corporate and Market (NASDAQ) Behavior

Posted By Barry Ritholtz On July 27, 2005 @ 4:35 pm In Investing,Markets | Comments Disabled

My jaw dropped on the way into work this morning as I was reading an article by Gretchen Morgenson in the NYT [1]:

For the 25 years that Tad LaFountain has been a technology stock analyst on
Wall Street, he has often written negatively about the strategies or prospects
of the companies he followed. Not once did a company retaliate, he said.

Until now.

Mr. LaFountain, who follows 21 semiconductor companies at Wells Fargo
Securities in New York, said yesterday that he was dropping coverage of the Altera
Corporation
, an industry giant, because its executives had told him they
would not take his phone calls, would not let him ask questions on analyst
conference calls and would no longer give him the information he needed to
analyze its business.

Why the cold shoulder? According to Mr. LaFountain, the company objected to
his negative opinion on Altera stock. Before he withdrew his coverage, Mr.
LaFountain had a sell rating on Altera shares.

Writing his final report on the company yesterday, Mr. LaFountain said he
expected to replace Altera in his list of companies with one "that takes a more
appropriate view of the role of independent investment research."

I find that astonishing. If there’s a problem with this analyst’s work, than use the appropriate channels to complain about his work. But banning the guy from asking questions?

There are two major problems with this issue: First, it reflect poorly on management. Quite frankly, it smacks of the time Ken Lay Jeff Skilling called an analayst who had the temerity to question his numbers "an asshole." I don’t know about you, but I sure as hell don’t want to own any company whose management in any way shape or form reminds me of Kenny-Boy Lay. If ever there’s a reason to simply dump a stock, this is it.

Second, it makes me wonder what the hell the exchanges are doing; Isn’t there some minimal requirements — besides capitalization — that companies should have to meet in order to maintain their listing status?

Hey Nasdaq and NYSE! You wanna get on the ball with this please?

>

UPDATE July 27 7:57pm

Michael correctly notes in the comments that it was Skilling and not Lay who said that:

April 17, 2001 [2]: Raised eyebrows during an conference call with stock analysts and reporters.  Richard Grubman, managing director of Highfields Capital Management in Boston, asked to see Enron’s balance sheet and was told it would not be available until later. "You’re the only financial institution that can’t come up with balance sheet or cash flow statement after earnings," Grubman grumbled. "Well, thank you very much, we appreciate that. Asshole," Skilling replied. This incident would later be cited over and over as evidence of Skilling’s unsuitability as a CEO. Skilling’s explanation: "The specific fellow that I was not real happy with is a short-seller in the market. I don’t think it is fair to our shareholders to give someone a platform like that they are using for some personal vested interest related to their stock position." 

I stand corrected.

>


Source:

An Analyst Receives a Time Out From Altera [1]
By GRETCHEN MORGENSON
Published: July 27, 2005
http://www.nytimes.com/2005/07/27/business/27place.html


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URL to article: http://www.ritholtz.com/blog/2005/07/unacceptable-corporate-and-market-nasdaq-behavior/

URLs in this post:

[1] NYT: http://www.nytimes.com/2005/07/27/business/27place.html?ex=1280116800&en=61622c5486a48b83&ei=5090&partner=rssuserland&emc=rss

[2] April 17, 2001: http://www.chron.com/cs/CDA/ssistory.mpl/special/enron/2404018

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