Keating Investments, LLC, the investment adviser to Keating Capital, Inc. (Nasdaq: KIPO) (
), has released a new white paper titled
Analyzing the Analysts:
A Survey of the State of Wall Street Equity Research 10 Years after the Global Settlement.
The paper, authored by Timothy J. Keating, President of Keating Investments and CEO of Keating Capital, outlines some of the changes that have occurred regarding equity research and initial public offerings over the last decade, identifies a number of policy issues that need to be addressed and proposes a series of common sense solutions.
One of the findings outlined in the paper is that as of December 31, 2012, out of 5,044 exchange-listed companies, 1,443 (representing nearly 29% of all companies listed on major exchanges) had no meaningful analyst coverage of their stocks. Further, of the 1,443 exchange-listed stocks without meaningful analyst coverage, 1,105 have market caps of less than $250 million, representing 55% of all listed companies with market caps under $250 million.
“These micro- and small-cap stocks are the farm team for tomorrow’s
500 companies,” said Mr. Keating. “But without meaningful equity research and the credibility and liquidity that go hand in hand with it, these companies have essentially been ‘orphaned’ by Wall Street. They receive none of the benefits of being public but carry all of the burdens.
“The primary reason for a firm to become public is to raise capital. When newly public companies freshly loaded with cash go out and hire employees and invest in plants and equipment, it helps grow the overall economy,” Mr. Keating continued. “Without the benefit of Wall Street research, institutions and individual investors are much less likely to make a bet on the future of an unknown company, thereby creating further drag on the nation’s economic recovery.”