Less than two weeks after Citigroup CEO Vikram Pandit was ousted, Citi’s star analyst, Mark Mahaney, has been fired for allegedly communicating unpublished estimates and then trying to cover it up. Some of the stocks Mahaney covered included Apple, Google, Amazon, and Groupon, among others.
It’s an interesting tale that showcases how hard regulators are cracking down on analysts. The Wall Street Journal reports that he was fired Friday morning after Citi Group was fined $2 million by the Massachusetts securities regulator for failing to supervise Mahaney and a junior analyst he oversaw.
Mahaney allegedly disclosed unpublished revenue estimates on YouTube, which is owned by Google, to a reporter. The junior analyst he oversaw allegedly disclosed Citigroup’s coverage plan for Facebook following its IPO to two TechCrunch reporters.
Mahaney declined to comment.
A readout of the report from the Massachusetts securities regulator is all very dark and ominous. Mahaney is referred to as the “Senior Analyst,” and the communication in question is referred to forebodingly as the “Three Questions Email.” A French business reporter emailed Mahaney to play the “yes or no” game with three questions: “Do you think that YouTube has been above your total net revenue estimate 2011? Do you think that YouTube will be above your total net revenue estimate 2012? Do you think that they are largely profitable?”
Mahaney’s response: “Yes. Yes. Yes.”
In a later email to a Citigroup colleague, Mahaney realizes that he just flubbed: “This could get me into trouble. Shoot.”
If it sounds like Mahaney is being made an example of, that’s because he is.
"This penalty should serve as a warning to the industry as a whole," Massachusetts’ top financial regulator, Secretary of the Commonwealth William Galvin, said in a statement.
This isn’t the first time Mahaney’s been fired. He was previously fired from the hedge fund Galleon Group for “not getting enough edge” on stocks—meaning he didn’t leak any info that would’ve made the stocks sexier.
Later, when he moved onto Citigroup, he became the top-ranked Internet analyst. Zillow CEO Spencer Rascoff told the Wall Street Journal that Mahaney was one of the reasons the company selected Citigroup as an underwriter for its $80 million IPO. He "probably spent 100 hours on calls with investors [during the sales process],” said Rascoff.
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