On September 11, 2010, Andrew Martin and Louise Story of the New York Times reported the legal victory of Wall Street analyst Richard Bove, in a defamation suit that BankAtlantic filed against him for naming the company in his 2008 report titled “Who Is Next? Not As Many Candidates As One Would Think.”
Bove, a well known industry analyst, listed the small Florida banking institution, BankAtlantic, in his report that ranked 107 bank companies from the highest risk to the least risky. In Bove’s report, BankAtlantic came in at 10th place on one list and was placed 12th on the other. The BankAtlantic lawsuit contended that Bove’s report falsely suggested that the institution was in trouble and that the analyst mistakenly looked to the finances of its holding company instead of those of the bank. The day after Bove’s report was published, BankAtlantic’s shares fell 25 percent.
Bove’s report explicitly stated that the “views expressed in this research report accurately reflect my personal views about the subject security and issuer. Furthermore, no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report.” Unfortunately, the report cost Mr. Bove dearly.
In addition to incurring over $80,000 in legal fees, Mr. Bove fought the suit alone. He did not receive support from the industry. He was declined help by the Securities Industry and Financial Markets Association, the New York Society of Security Analysts and the CFA Institute. His then-employer, Ladenburg Thalmann, settled its issues with BankAtlantic but left Bove to fend off the suit by himself.
At the time of the suit Bove said on Bloomberg Television, “As an analyst, I feel that I should be able to say what I choose to say as long as it is objective and based upon fact. In the banking industry, there is a fear that statements by analysts which are very negative could have an impact.” He also said he did not know of any other analyst “that’s been sued for writing something about the industry.”
The New York Times reported that 8 out of the 20 companies Mr. Bove said were most at risk have failed, and most of the others’ stock prices have spiraled downward and remain low. On the second list of rankings, 9 of the top 20 banks are gone.
About 3months ago, Bove and BankAtlantic settled, and the bank was not awarded any monies from Mr. Bove. Regardless, Mr. Bove paid too high a price for the right to express his opinion and more importantly to find out that no one had his back. Maybe he should file a defamation suit against the bank.
