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Illustration: Annelise Capossela/Axios

Wall Street's equity research isn't what it used to be. There are signs the longtime cutback in sell-side attention is getting worse. In the last five years, the number of ratings on S&P 500 companies shrank by nearly 800, or 6.5%, according to FactSet data provided to Axios.

Why it matters: The research desks haven't traditionally been direct money-makers for banks. But as they shrink, the information they provide to investors goes with it (though exactly how much value they add is a point of debate).

Details: Roughly 19% of companies in the Nasdaq Composite (stripping out SPACs) have no coverage at all, per FactSet.

  • Some of those sell-side orphans are smaller companies, like modeling agency Wilhelmina, which has a market cap of just $24 million. But others are surprisingly large, including Icahn Enterprises, valued at $14 billion.

The intrigue: Loews, a conglomerate that owns the namesake hotel chain and an insurer, has long been underfollowed and is the lone S&P 500 company with no sell-side coverage.

Where it stands: Analyst headcount across the 12 biggest investment banks — including Bank of America, BNP Paribas and Credit Suisse — shriveled from 4,400 in 2012 to 3,100 last year, per the latest data available from Coalition Greenwich.

Catch up quick: A recent European regulation banned banks from doling out free research as a client perk. After it took effect, buyers were sparse and banks now had to justify the cost.

  • Hundreds of sell-side analysts lost jobs. One recent paper found there's been some effect on the stock market, while another said the opposite.

Before that, the rise of passive investing had already started to work against analysts.

But, but, but: Companies like Walmart are getting more sell-side attention than ever.

  • "The investor side is a big reason for adding coverage or dropping coverage: Do they want information about a company or not?," says Rachel Flam of Texas A&M University, who's researched sell-side analysts.

B. Riley Financial is among the firms bulking up its research division.

  • It now has twice as many analysts on staff (40) and companies in its coverage (400) than in 2015.
  • Like others, the firm is beefing up coverage in at least one hot area of the moment: cryptocurrency.

Of note: B. Riley Financial itself (valued at $2 billion) has no analysts covering its stock.

Go deeper

Felix Salmon, author of Capital
Jul 21, 2021 - Economy & Business

Nasdaq gets serious about private-company share trading

Photo: Pablo Monsalve/VIEWpress via Getty

It's one of the biggest competitions out there: Who will be the go-to platform for buying and selling stock in private companies? A consortium of giant banks is now teaming up with Nasdaq to try to ensure that the answer is to be found on Wall Street, rather than in Silicon Valley.

Why it matters: No matter how many companies go public, the total valuation of private companies only ever seems to go up rather than down. Which means there's big money to be made in trading stakes in those companies.

Updated 11 mins ago - Politics & Policy

Pelosi appoints GOP Rep. Kinzinger to Jan. 6 committee

House Speaker Nancy Pelosi (D-Calif.) announced Sunday that she has appointed Rep. Adam Kinzinger (R-Ill.) to serve on the House select committee investigating the Jan 6. Capitol riot.

Why it matters: Pelosi's announcement comes after she rejected two of the five Republican appointments offered by House Minority Leader Kevin McCarthy (R-Calif.).

Mike Allen, author of AM
40 mins ago - Politics & Policy

America's "Friendscape" crisis

New research shows Americans have fewer friends than in the past, and are less likely to have a best friend.

  • Why it matters: At a time of excruciating mental and societal stress, this is another sign we're breaking apart. And the friendship drought could get worse with more people working remotely or hybrid-ly.