Wall Street Self Dealing Again

Zero Hedge is reporting that there are strong indications that Wall Street firms are going back to their Dotbomb era practice of swapping favorable ratings for analysts in exchange for business underwriting their IPOs:

1) First Merrill Lynch/BofA gets clients to subscribe to a massively diluting equity offering (105 million new shares out of 271 million pre-offering shares, or 39% dilution). The offering prices at $7.10/share, a 6% discount to the previous day closing price of $7.49. In the process Merrill pockets an underwriting fee likely equal to 3% of the offering or around $20 million.

2) Minutes after the offering Merrill REIT analyst Schmidt comes out with a report, changing the recommendation on the stock from a Sell to a Buy, thereby getting the vanilla money which makes critical fiduciary decisions merely based on what some sell-side analyst will recommend. As a result Kimco stock rises throughout the day and closes at $9.40, a 25% premium to the closing price, and a 30% premium to offering price of $7.10, which closed that very same day.

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Go read the rest. It's pretty damning, and yet another indication that at least 1 in 10 of the brokers, executives, and analysts on Wall Street should be under criminal investigation.