Diary of a Downgrade Morning

I am a sell-side analyst. Raise your hand if you're jealous. We used to be rock stars, paraded on TV. Not anymore. These days, my job kind of sucks. Can barely talk to anyone, can barely get information from anyone and I'm certainly not getting paid like I used to. But I actually like this business, and because I keep my head down, do what I need to do and generally do a pretty great job rating stocks

I am a sell-side analyst. Raise your hand if you're jealous. We used to be rock stars, paraded on TV. Not anymore. These days, my job kind of sucks. Can barely talk to anyone, can barely get information from anyone and I'm certainly not getting paid like I used to. But I actually like this business, and — because I keep my head down, do what I need to do and generally do a pretty great job rating stocks — I have more access and more respect than a lot of analysts I know.

But today, I'm a pariah. This morning, I downgraded — let's call it Company X — from neutral to sell. My firm did its IPO a few years ago. But I had to do it. The fundamentals are not great, and the company's shares are priced to perfection. And now the company's distribution channel is falling apart; its days-sales-outstanding (DSO) ratio is rising. I cannot be the only one who has noticed this. Yet no one else is speaking up. That's because nobody likes a downgrade. Well, nobody but the shorts.

9:34 a.m. Call from CEO of X. He has a nasty temper, and he'd actually be intimidating if he weren't four-and-a-half feet tall with braces. After a stream of expletives, he tells me I didn't understand the company's business, that my statements are inaccurate, not material and that in general, as long as he's known me, I've missed the essence of its business plan. OK, great. Nice talking to you.

9:36 a.m. Voicemail from the CEO's assistant. Company X is having a conference call early next week. I am no longer invited. Super. Love it when grown-up professionals get pissy. Of course, they're afraid I'll ask the questions they don't want to answer. But here's the thing: Everyone else has my information now, and someone is going to ask the questions anyway. But I guess it won't be me. Covering this stock is going to be lots of fun from now on.

9:47 a.m. Head to the office kitchen for a coffee refill. I'm needing serious caffeine today. Pass by a VP from investment banking. He shoots me a nasty look and mutters something under his breath that I can't hear. All I can think is, Dude, do you really think Company X is going to ask you to do another big round of financing anytime soon?

10:07 a.m. Voicemail from a retail broker. I usually make a point of ignoring their calls, their constant pleading for inside information — as if I were privy to any. Not surprisingly, he's mad, thinks I should have somehow vetted it so that he could have gotten his clients out. I am tempted to call back and ask how that would be legal. Also would like to know what he didn't understand about the report — but I can't, so I won't.

10:28 a.m. Call from institutional investor who had a long position in the stock. Not happy. OK, I get that. But I'm still not getting why people are so shocked by this. This isn't out of the blue. And, anyway, that's the game. I guess no one expected me to go below the Street, because I don't usually do that — well, unless it's clearly warranted. Which, in this case, it was. So get over it.

10:39 a.m. Another coffee refill in the kitchen. Pass by another banker, a managing director this time. Another — more subtle, but still unmistakable — glare. Maybe this is the problem, folks: You're spending too much time in the kitchen. Don't blame me if you aren't bringing in fees. You'd think a downgrade here or there would give our firm some needed air of independence and legitimacy. (Nah, not when you're competing for some banking business.)

10:46 a.m. Voicemail from a guy at a hedge fund. He is pleased. He sounds like he wants to be my new best friend. Ah, got it. He's been short the stock. He doesn't actually want to be my new best friend. Probably just wants to know what else I cover.

10:59 a.m. Is it too early for lunch? I need a break from all the constituencies who still operate under the false (and illegal, but who's counting?) assumption that my only job is to say nice things and make their jobs go more smoothly. Besides, I just got some unfortunate news about another one of my companies. There's a chance I may have to downgrade again. Great. Looking forward to it. Remember when I said nobody (OK, almost nobody) likes a downgrade? That includes me. But that doesn't mean I can get out of doing it.

Writer's BIO: Christie Matheson
was always very nice to the sell-side analysts back when she worked as an investment banker.

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