Did investment banking fees influence analyst coverage of Blackstone?
Posted by: in Private Industry NewsFiled under: The Blackstone Group, Private equity industry, Blackstone, IPO, 2007
The Wall Street Journal looks at a key reason many investment banks may be unwilling to “lock horns” with The Blackstone Group (NYSE: BX) over financing for its previously announced deals: the firm generates more investment banking business than any other firm — $646 million in fees in 2007 alone — and it’s just not worth alienating Stephen Schwarzman to save investors some money in the short-term.
This got me thinking about something: were those investment banking fees influencing the Wall Street analysts who called Blackstone a buy at its IPO, even when most in the financial press, including several of us here at BloggingBuyouts, were trashing the offering as a cash-out effort by the firm’s avaricious CEO?
One indication of possible bias on the part of analysts might be the divergence between the ratings given by sell-side analysts versus independent research analysts.
Thomson/First Call reports that nine analysts cover Blackstone: 4 strong purchases, 4 buys, and 1 hold.
Jaywalk Consensus polled 6 independent analysts — “professional firms that attest to having no investment banking or other potential conflicts that might impact the integrity of their research” — and found 1 strong buy, 1 purchase, and 4 holds.
In light of the massive investment banking fees Blackstone generates and the discrepancy between independent analysts and traditional sell-siders, a cynical person might conclude that the integrity of Wall Street research is still compromised, in spite of the high-profile slaps on the wrist handed to investment banking whores like Henry Blodget.
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