Internet Analyst Reportedly Under Investigation by N.Y.
Internet analyst Henry Blodget is reportedly among a number of analysts being investigated by the New York state attorney general’s office over conflicts of interest they may have had while making stock recommendations.
Scott Brown, a spokesman for state Atty. Gen. Eliot Spitzer, confirmed Monday that an investigation is underway, but would not be specific about who was under investigation.
He declined to comment on Monday’s Wall Street Journal story that Blodget, an analyst with Merrill Lynch & Co., is a subject of the probe.
Blodget, who gained prominence on Wall Street for his recommendations to purchase Internet stocks in the early days of the boom, has been a target of critics who say analysts can provide misleading information or advice on stocks that can hurt investors but help large investment houses that handle stock and bond sales.
Blodget became a darling to investors after he predicted that shares of Amazon.com would soar to $400 in 1998. At the time, the Seattle-based e-tailer’s stock was priced at around $240 a share, but it eventually surpassed $400 a share, helped by his recommendation.
But as the Internet stock bubble burst, he took criticism about his stock picks, including Pets.com and EToys, both of which failed without ever turning a profit.
Shares of Amazon, after adjusting for three stock splits, closed down 6 cents Monday at $11.65 a share on Nasdaq.
Blodget announced last month that he will leave Merrill Lynch with a severance package estimated at $5 million.
“We do not comment on the existence of possible probes other than to say that we fully cooperate with all appropriate authorities,” said Joe Cohen, a spokesman for Merrill Lynch and Blodget.
“The decision to leave the firm was entirely his own and was made at a time when thousands of employees are choosing to leave for a variety of personal and professional reasons,” Cohen said Monday.
“Henry Blodget is held in high regard both by our firm and by the Wall Street community, which has given his performance as a tech stock analyst extremely high marks over much of his career during very difficult markets,” he said.
“Our research analysts are not compensated based on investment banking business and they do not solicit investment banking business.”
In June, Spitzer’s spokesman called the investigation an “inquiry” into whether Wall Street analysts were providing tips without bias or conflicts of interest.
“We’ve had an ongoing investigation into whether there are inherent conflicts in the work that analysts do for investment houses that are also seeking underwriting business,” Brown said. “Our concern is that the public receives accurate information when making its investment decisions.”
