Jefferies on Monday released a six-page letter to address markets being informed about its strength by, "half-truths, false rumors and lies being disseminated with malice." The letter, while addressed to unnamed "irresponsible" individuals, cites data points intended to buck ratings firm Egan Jones and its November reports, which have sent Jefferies shares nearly 20% lower.
Jefferies competes in investment banking activities against the likes of Goldman Sachs (GS - Get Report), Morgan Stanley (MS - Get Report) and JPMorgan Chase (JPM - Get Report) that all have balance sheets ten times larger, and also against higher market cap brokerages Raymond James (RJF - Get Report) and Charles Schwab (SCHW - Get Report). Because of its scrappy nature, small dings to their reputation may be more destructive than multi-million dollar suits filed against larger competitors.
Meanwhile, Egan Jones competes against ratings behemoths Moody's, Standard & Poor's and Fitch Ratings but has just five analysts and 14,000 ratings -- a miniscule size compared to the over half million corporate ratings that earn its competitors billions in sales. If they are proved wrong about Jefferies, it could be a knock-out punch to the firm's ascendance.Both firms, nevertheless, have provided ample competition against their larger peers. Jefferies, which provides essentially the same financial offerings as powerhouses like Goldman, has a a specialty in advising restructurings and M&A, while it's also strong in underwriting IPOs and high yield debt. In U.S M&A and IPOs, Jefferies is near the top 10 with market shares that are only second to some of the biggest banking conglomerates in the world. The investment house also didn't need government bailout funds to survive the crisis, unlike some competitors. On the other side of the boxing ring is, Sean Egan a co-founder of Egan Jones, who was called by Fortune Magazine the number one person to who saw the crisis coming - ahead of Nouriel Roubini, David Einhorn and John Paulson. Egan Jones won the honor after giving harsher ratings assessments to Ambac Financial, MBIA, Lehman Brothers and MF Global prior to their bankruptcies than the big three ratings agencies.