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An Analyst On The Attack


When Wall Street struck its $1.4 billion settlement with regulators in 2002, the deal was supposed to herald a new era for investment research. The big brokerages erected brick walls between analysts and bankers, and independent research shops popped up everywhere.

But for all that reinventing, the analytical path of least resistance still reigns. "We're trimming our estimate by a penny and maintaining our intermediate-term, trailing-12-month equal-weight rating, with a going-forward bias toward becoming aggressively neutral," a typical research note might read. There's good reason for the caution (and the kind of obfuscatory language that would rankle Charlie Brown's teacher). Even independent analysts rely on executives for access and information; alienating them can be a bad career move.

So Richard S. Greenfield of Pali Research stands out in the sea of noncommittal analysis by making pointed demands, the sort you hear from an agitating hedge fund manager. "I focus time and effort only where I think we can make clients money," he says. "Can we be activist? Absolutely."

Cablevision Systems Corp.'s (CVC) controlling Dolan family found themselves in Greenfield's crosshairs in October, after attempting to take the company private for a share price of 27, a 17% premium over where the stock was trading. Greenfield thought the company could fetch as much as 40 if it opened bidding to outsiders, and he took management to task publicly. The Dolans, he argued, were positioning themselves to snag an extra $1.8 billion profit by flipping the company to Time Warner after taking it private. (TWX) Sensing dissent in the boardroom, he urged the special committee of directors to seek a takeout price of 35, while upping his target twice based on the improving industry. The Dolans came back with a "best and final" offer of 30.

Many viewed the sweetened deal as a fait accompli. "A lot of the analysts were just resigned to the Dolans getting their way," says a big stockholder. But Greenfield reemerged to blast out a note entitled: "Do Not Let Chuck and Jim Dolan Steal Cablevision." He argued that the Dolans were "exercising poor corporate governance by publicly stating they would not sell the company [to outsiders]." Cablevision's committee turned down the bid four days later, and the stock shot above 30--vindicating Greenfield's claim the Dolans were holding it back.

Being a sell-side analyst usually entails a daily drip-drip of updating earnings models and issuing commentary on most every company in an industry. Now, like the rash of institutional investors who take positions in companies and rumble for change, Greenfield, a former Goldman Sachs analyst (GS), is picking his battles.

Another recent target: Viacom Inc. (VIA). In a July note, Greenfield lamented that no one at the lagging media conglomerate was "willing to stand up, communicate a concise global visionand execute on that vision." Then he mockingly bulleted Viacom's "excuses" for poor growth before basically calling for the head of then-Chief Executive Thomas E. Freston: "If Mr. Freston cannot swiftly reorient Viacom, [the board] needs to find a new CEO and/or consider selling the company."

Two weeks later, Greenfield put out a note directed to Chairman Sumner M. Redstone titled "Dear Mr. Redstone: Take Viacom Private." When Redstone ousted Freston in September, Greenfield kept up the pressure, putting out recommendations tinged with an "I'm-watching-you" tone.

Last year he also flagged DreamWorks Animation SKG Inc. (DWA) for allowing its majority investor to benefit from the falling stock price, and the ipo of Vonage, which has since plunged 70%. Says Greenfield of his mo: "If I'm not excited about the stock or feel I can't make a difference, then I'm just not going to cover it." The Dolans wish he didn't cover theirs.

By Roben Farzad


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