Wall street banks have started covering the firms which are not publicly treated, e.g. J P Morgan Chase released a report of 100 large private companies on OpenAI and Citi group released a report of 100 large private companies. These companies mostly belonged to the tech sector. Other poor institutions will soon follow suit.
The US securities market is showing an upward trend. Investment banks would like to arrange secondary share sales of top unicorns. They are after the employees who would like to divest their stakes. Services could be offered to these new billionaires when they encash their holdings. Apart from this, they earn their brokerage fees.
It is difficult to arrive at a fair price for investors. Here the research done by investment banks come handy. It could facilitate secondary sales. The thematic research is a value add-on for institutional investors, who find brokerage reports irrelevant. Asset managers understand a few dozen stocks in a concentrated market. It then becomes unnecessary to outsource due diligence to investment banks.
At present, banks treat their research divisions as a cost center. The costs are met by brokers, deal makers and wealth managers. There is a fall in manpower of equity analysts from a position 10 years back. Manpower is mainly curtailed in Europe and Asia. Compensation too has stagnated. The new trend of covering firms which are not publicly traded provides the manpower an opportunity to prove their worth. There is parallelism that runs between journalism and equity research. Both embrace the Mosaic Theory. They piece together pattern by collecting small pieces of information from every source.
The trickle will soon be a flood.
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