Photo: Lisa Du, Business Insider
Another shot has been fired in the debate over Jefferies’ long term viability. This time, it’s from Oppenheimer analysts Christ Kotowski and Ben Chittenden, directed right at Egan-Jones.In a note this morning, Kotowski blasted Egan-Jones for their vague, confusing and inconsistent analysis of Jefferies. Egan-Jones had released a note yesterday advising Jefferies to deleverage and raise $1 billion in capital or face another downgrade.
The reports’ introduction pretty much sums up the smack down that Oppenheimer is about to lay on Egan-Jones:
Every analyst is entitled to his or her opinion, but one would think that one aspiring to become a significant rating agency would do a minimum of proof reading and fact checking before launching a highly controversial report. In a report yesterday from Egan-Jones we read: “JEF has seen a decline of approximately 37.8% per an num over the last couple of years which is disappointing.” Well aside from the absurdity of saying “approximately” when one drills down to a tenth of a per cent, while at the same time leaving “last couple of years” totally vague, the number is just flat out wrong by a country mile.
The report goes on to point out several ambiguous and possibly inaccurate facets of Egan-Jones’ report, including:
- Egan-Jones’ 37.8% decline per year figure for Jefferies is over a “couple of years,” with no exact time frame
- Jefferies had an annualized revenue of around $2.4 billion in 2010, according to Oppenheimer. But the Egan-Jones report says total revenue for 2010 was $524 million—that is coincidentally the same figure as 3Q11.
- An Egan-Jones report on Jefferies from November 2 said the 2010 revenue was $680 million, inconsistent with the $524 million figure they used in the most recent report
- Egan-Jones claimed Jefferies’ operating margin fell to 0% in FY 2010; but Oppenheimer’s calculation of Jefferies earning $397 million on $2.2 billion of revenues calculates to 18.1%
Ouch. Any takers on who fires the next shot at Jefferies?
Whatever the case, Jefferies’ stock has stabilised the last two days despite falling nearly 20% in the last month. It’s still trading low around $10.26 per share today, but it’s up 1.8% since open.
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