Financial Daily from THE HINDU group of publications
Thursday, Apr 18, 2002
Financial Daily from THE HINDU group of publications Thursday, Apr 18, 2002 |
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Stocks Money & Banking - Investment Banking Enron shares as `collectibles' Pratap Ravindran
MUMBAI, April 17 THE Enron narrative got off to a start as high drama, transformed itself into a whodunit, segued into tragedy - and has now degenerated into low farce. A Florida-based outfit called Frame-A-Stock Corporation is offering a single Enron share, framed if you want, as a "collectible" or a "truly unique gift" to be given at a "baptism, wedding, anniversary or any other occasion." As is only appropriate in that Enron had touted itself as a New Economy company, its shares are being sold on-line at www.frameastock.com. As it happens, the innovative offer of single Enron shares, framed or unfolded, coincides roughly in time with the allegation by the New York Attorney General, Mr Eliot Spitzer, made in the course of a recent press conference, that internal e-mail secured from one of Wall Street's biggest investment banks, Merrill Lynch & Co, establish that its analysts had promoted iffy technology companies that they had no faith in - even as the bank was earning fees by selling the stock of these companies. The e-mail records apparently reveal that Mr Henry Blodget, the much-celebrated Internet analyst at Merrill Lynch, as also his colleagues, had issued highly laudatory reports about certain companies while deriding them in private. Thus, by way of illustration, a company given top rating by analysts had been described in-house as "a piece of junk." Another had been referred to privately as "such a piece of crap" even though the Merrill Lynch Internet group analysts had advised investors to buy more of its stock. In an interview given after the news conference, Mr Spitzer said: "The e-mails are an important window into what the analysts and investment bankers were thinking. What these e-mails demonstrate is (that) the desire to satisfy investment banking overrode the obligation to provide honest analysis... that's not a pretty story." A New York state judge, in response to the allegations made by Mr Spitzer's office in its 37-page affidavit, has ordered Merrill Lynch to disclose the financial ties between its investment bank and the companies plugged by its stock analysts. However, Merrill Lynch has objected vigorously to the charges, stating that Mr Spitzer's "conclusions are just plain wrong" and the e-mail remarks cited "out of context." According to the bank spokesman, Mr James Wiggin, the e-mails reflect the process of deliberation among analysts - and not fraudulent or misleading activity. "There's a lot of debate and discussions behind the scenes that go into rating a stock. And that's what these e-mails reflect...."
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