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Merrill Lynch's E-Mail Mess

Here's How Merrill Lynch's Public Stock Recommendations Compare With Analyst's Internal E-mail Comments

Apr 12, 2002 | Fortune If the dotcom bust and the Enron debacle weren’t enough to make you raise a skeptical eyebrow at Wall Street practices, Henry Blodget’s e-mails may do the trick. The former Merrill Lynch Internet analyst’s private comments about stocks he publicly touted came to light this week in an affidavit filed in New York by State Attorney General Eliot Spitzer.

Following a 10-month investigation that focused on Merrill’s Internet research arm, Spitzer’s office concluded that the firm’s "supposedly independent and objective investment advice was tainted and biased by the desire to aid Merill Lynch’s investment banking business." (Merrill Lynch says the conclusions "are just plain wrong" and the e-mails "show that there was normal give and take, as well as vigorous debate among analysts as they assessed different companies.")

Here’s a look at Merrill Lynch's public stock ratings compared with the firm's internal analyst comments taken from the attorney general's court filing.

Merrill Lynch Rating
Analysts' Internal E-mail Comments

Short-term neutral
Long-term buy
"...fundamentals horrible."
(March 15, 2001)

Short-term accumulate
Long-term buy
"we are neutral on the stock"
(December 27, 1999);
Six-month outlook is "flat"
(December 29, 1999);
"such a piece of crap"
(June 3, 2000)
Short-term neutral
Long-term buy
"nothin" interesting except banking fees

Short-term buy
Long-term buy
"this stock is a powder keg, given how aggressive we were on it earlier this year and given the 'bad smell' comments that so many institutions are bringing up"
(July 13, 2000);
"piece of junk"
(October 20, 2000)

Internet Capital Group
Short-term accumulate
Long-term buy
"Going to 5 [dollars]"
(October 5, 2000);
"This has been a disaster...there really is no floor to the stock."
(October 6, 2000)

Short-term accumulate
Long-term buy
"POS [piece of s--t]"
(December 4, 2000)

24/7 Media
Short-term accumulate
Long-term accumulate
"piece of s--t"
(October 10, 2000)

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