Confessions of a Wall Street Analyst: A True Story of Inside Information and Corruption in the Stock Market by Daniel Reingold; Jennifer Reingold

Author:Daniel Reingold; Jennifer Reingold
Language: eng
Format: mobi, epub
Tags: Securities, Investments & Securities, Economics, Financial services industry, Finance, Business, True stories, Finance & Accounting, Corrupt practices, Insider trading in securities, General, United States, Investment advisors, Investment Finance, USA, Investment & securities, Securities industry, Business & Economics, Telecommunication
ISBN: 9780060747701
Publisher: Collins
Published: 2007-05-17T17:15:09.210000+00:00

To Publish or Not?

By mid-July, it had been exactly four months since I had written anything other than factual summaries on Global, Frontier, Qwest, and US West. And although I had made what I thought was the best decision at the time, I was really beginning to suffer for it. I had been essentially mute on four of the major companies in my industry for months while my competitors, whether they worked for the banks involved or not, continued to speak out. The Merrill salesmen and my clients were calling me all the time looking for some guidance on these falling stocks, and I couldn’t say anything during the most important period of the year for me—the time when the I.I. votes were cast.

I felt more and more anxious. What the others were doing didn’t seem right, but clearly no one was objecting to it, and I, as the lone holdout, was the only person paying the price. So in a move that now looks blatantly inconsistent, I decided to resume coverage of Qwest and US West. I issued reports on each of them with Accumulate, or “2,” ratings, on July 21.

My earlier conversations with the lawyers didn’t really play into it at all, at least not at first. I liked the way the two deals had ended up. In the Qwest–US West deal, I thought the decision to dramatically cut US West’s dividend was wise, since it freed up money to invest in cell-phone service and high-speed Internet access, among other things. Plus the stocks had fallen so far that they were now good values. Based on my models, I saw Qwest shares rising as much as 33 percent and US West’s 28 percent.

But I wasn’t totally sanguine either. “Our rating is Accumulate instead of Buy,” I wrote. “Despite such attractive upside, we anticipate the usual pressure from short-selling arbs and the approximate one year wait until merger close. We are also concerned about increasing wholesale [long distance] pricing pressure and new initiative startup costs at both companies.”

Megan and I immediately started to work on a similar report on Global Crossing and Frontier. But, within a few days, I began to have second thoughts. Merrill was going to make about $20 million, but most of the fee depended on the deal actually being consummated. Since the shareholder votes hadn’t yet happened, it occurred to me once again that perhaps I shouldn’t be writing about any of these four companies. My opinion, if positive, could be interpreted as trying to influence shareholders to vote yes on a deal that Merrill had millions riding on. I asked the compliance folks about it, and they reminded me that I was cleared to write whatever I wanted thanks to the SEC’s No-Action Letter.

But I quickly realized that regulation or no regulation, I had just violated the principles I had so steadfastly held to back in March when this particular four-way M&A episode got started. I began to fear that my clients might think

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