The world of investor relations began shrinking several years ago with the decline of sell-side analyst research. Today, the game changer is the buy-side’s growing move away from analyzing individual companies in their portfolios and toward the use of asset management. This should alarm any investor relations officer, senior managers, and boards of directors.
The significant decline in sell-side research has relegated a majority of listed companies to be “orphan stocks” with no research coverage. This began with the $1.4 billion global settlement with 10 major brokerage firms engineered by then-New York Attorney General Eliot Spitzer, and it was followed closely by a key provision in the Sarbanes-Oxley Act that forced the separation of equity research from investment banking. Once sell-side analysts could no longer receive large bonuses for bringing corporate business to the investment banking side of their firms, sell-side analysts migrated to the buy-side and boutique independent research firms.
