Warburg Analyst Advises Investors to Sell JetBlue
UBS Warburg analyst Samuel Buttrick on Tuesday advised investors to sell JetBlue Airways Corp. shares less than a month after his firm helped manage the discount airline’s initial stock sale.
Buttrick started coverage of JetBlue (ticker symbol: JBLU) at “reduce,” one of seven companies with the firm’s second-lowest rating. He said in a note to clients that shares are too expensive after doubling from their IPO price.
Buttrick’s recommendation stands out because Wall Street analysts’ reluctance to criticize investment-banking clients has gotten them into trouble.
The Securities and Exchange Commission and the New York state attorney general’s office are investigating possible conflicts of interest at Wall Street firms.
“Warburg is clearly trying to send a message that they will be independent on the research side from the investment-banking side,” said Thomas Angers, director of research at Glenmede Trust Co. “You wouldn’t have seen this a year ago.”
Less than 1% of the more than 900 companies Warburg covers have “reduce” ratings, according to Thomson Financial/First Call. The firm has no “sells,” its lowest possible ranking.
About 3% of all analysts’ ratings are “sells,” according to Bloomberg data, while 62% are “buys” and 34% are “holds.”
Buttrick didn’t return calls seeking comment.
“Saying JetBlue may be a little overextended is what should happen,” said Erick Maronak, director of research at NewBridge Partners. “More firms should be willing to step up and say that a stock is ahead of itself.”
Morgan Stanley Dean Witter & Co., which led JetBlue’s IPO last month, started the stock at “equal-weight,” saying shares are fairly valued through 2003. Merrill Lynch & Co., which also participated in the sale, placed a long-term “strong buy” on the shares.
“Maybe the scrutiny is getting analysts’ ratings to be more accurate,” said Nick Redfield, a transportation analyst with Banc One Investment Advisors Corp.
Morgan Stanley analysts William Greene and Kevin Murphy didn’t return calls for comment, and spokeswoman Diana Quintero declined to comment. JetBlue also declined to comment.
JetBlue raised $158.5 million on April 12 by selling 5.87 million shares at $27 each. The stock surged 66% on its first day of trading and climbed as high as $54.50, about double its initial price.
Shares of the New York-based airline fell $4.90 to $49.60 Tuesday on Nasdaq.
They still have the second-biggest gain of the 45 IPOs this year, according to Bloomberg data. JetBlue has climbed 84% from its offering price, trailing only PayPal Inc. (PYPL), which has doubled from its IPO price in February.
Bloomberg News
SEC Seeks Electronic Filing for Foreign Firms
Foreign companies would be required to file registration statements and other documents electronically with U.S. securities regulators under rules expected to be adopted today.
Ending the option of foreign entities to file on paper with the Securities and Exchange Commission will boost the amount of information investors can get through the SEC’s Electronic Data Gathering, Analysis and Retrieval (EDGAR) system.
Of the 1,310 foreign companies that filed documents with the commission in 2000, only 232, or about 18%, chose to file on EDGAR that year, according to the most recent SEC figures available.
The measure, which also would apply to foreign governments offering securities, will be considered for final adoption by the three SEC commissioners at a public hearing today.
The commission considered making foreign entities use EDGAR several years ago, but backed off due to fears some parts of the world were not technologically ready.
“This is a proposal whose time has come and most people recognize that,” said Brian Lane, who headed the SEC’s Division of Corporation Finance before becoming a private securities lawyer. “This is about getting more information into the hands of U.S. investors.”
Reuters
SEC Makes Minor Changes to Analyst Rule
The SEC made only minor changes in its plan to limit conflicts of interest among stock analysts, responding to objections from Merrill Lynch & Co. and other Wall Street firms, SEC officials said.
The revised plan is set to be adopted today as a rule that will bar analysts from working under investment bankers and from being paid out of revenue from specific investment banking transactions, SEC market-regulation director Annette Nazareth said.
The rule also will force firms to disclose in reports and during TV appearances how much they stand to earn from companies covered by analysts, she said.
The SEC proposal, which faces continued Wall Street objections, falls short of more sweeping changes being pressed on brokerages by New York Atty. Gen. Eliot Spitzer.
“The SEC needs to establish that truly fraudulent analyst recommendations violate the law, and [SEC Chairman] Harvey Pitt may want to take some of the thunder back from Spitzer,” Georgetown University law professor Donald Langevoort said. “The next shoe to fall may be SEC enforcement actions.”
Bloomberg News
