Remember Henry Blodget? How could anyone forget? Isn't this the man who made headlines in the dotcom boom of late last century by making a ridiculous share price prediction for the then heavily loss-making
As Blodget acknowledges wearily, the story got worse after that. He moved from Oppenheimer & Company to Merrill Lynch, where he was paid a reported $12m a year and became a poster boy for the technology boom. However, he left Merrill in 2001 after the dotcom crash and a year later emails from the firm that were published by the then New York state attorney-general Eliot Spitzer led the Securities & Exchange Commission to file a civil securities fraud case.
The case was settled with no admission of guilt, with Blodget paying a $2m fine plus a $2m disgorgement and agreeing to a censure and permanent ban from working in the US securities industry. “It was a lot of money,” winces Blodget, 48. “I don’t even like to think about it.” Now he is co-founder and chief executive of Business Insider, a stock market news website group that claims 55m unique global visitors a month and has recently launched in London.
So what is he trying to do? Prove his detractors wrong as a media tycoon or achieve some kind of redemption for what lies in the past? Blodget laughs nervously when I say this on a rainy evening at a restaurant in London’s Canary Wharf. I order what Americans call hot tea with milk. Blodget wants to as well but is worried. "I'm scared to have that as I wouldn't get to sleep," he frets. "I would totally have it.”
I want to hear the story in his own words. Born to a banker father in New York, he worked on a provincial paper in Nantucket, Massachusetts, went to Yale and arrived on Wall Street in 1994 as an institutional analyst with
"That's when I gained some public coverage," he recalls, with understatement. "There was a lot of publicity around Amazon.com." Can he remember the numbers? "Only because I have gone back and reviewed it many times. When I started covering the stock, it was about $90 a share. I put together a due valuation analysis to try to figure out what it might be worth and there was a huge range, from zero all the way up to $500 a share. So I laid out that scenario, the stock continued to rise and then it was about $240 and the sales team at Oppenheimer were asking what we really thought this stock could do.
"I put a $400 target on it at the end of 1998 and was very startled to see the reaction that got. It didn't seem particularly outlandish. It was like predicting that a $24 stock would go to $40 but, maybe because of the extra zero or for whatever reason, it caught people's attention. The stock got to $400 within three weeks, which I was not expecting.”
Market collapse
Amazon peaked at over $500-a-share and then collapsed. But it gradually came back and is now trading at several times that $400 mark, adjusted for stock splits." Sixteen years later, Amazon's CEO Jeff Bezos is a billionaire and Blodget's prediction doesn't look at all outlandish. "No," he agrees. "I'm glad that one worked out. A lot of others did not." Indeed, over-optimistic forecasts for the likes of Yahoo, eBay and AOL saw Blodget’s star tarnished in contrast to its earlier gleam.
“Any time there's a big market boom, people usually get associated with one side or the other,” he surmises. "I definitely got associated with being quite bullish about it. I don't think I was as bullish as I was made out to be but I was definitely associated with it until it peaked in 2000…..Some of the companies I was very confident would survive did well. Some did not do well.
Blodget returned to journalism, wrote a book about investing and then in 2007was invited by internet entrepreneur Kevin Ryan to become editor-in-chief of Silicon Alley Insider, a New York-based digital publication for technology which went national across the US, added a finance-focused site and renamed the larger umbrella group Business Insider. Now structured around technology, markets and finance and strategy, it has raised $30m of investment from backers including Bezos, Marc Andreessen, investment firm Allen & Co and venture capital firms Institutional Venture Partners and RRE Ventures. Blodget says he has personally put in a “six-figure sum”.
There are seven country-specific sites, including Australia, India, Malaysia and China and, with 200 staff, including ten in the UK, turnover was $20m last year, though Blodget admits profitability is variable. “It depends on the quarter,” he says.
“We’re in investment mode but this quarter we’ll be profitable. We’re not running the business to try to be profitable now. But, whereas seven years ago there was a real question as to whether digital journalism would ever be a viable business, I think we and others have answered that and there is no question that it can. We passed the Wall Street Journal earlier this year, which was a milestone that I would have thought was a crazy idea seven years ago.”
Redemption?
Blodget has ambitious plans to grow the business but is it redemption he craves most now? He seems to agree. “There are scars that will never heal,” he says. “Given what happened and how public it was, at first I wanted to do anything I could do to earn back the trust that I had lost.
“As an analyst, I was in the very privileged position of having millions of people around the world listen to me. I felt like I let a lot of those people down and so I was very hopeful that people would give me the chance to earn back their trust and millions of people have, which I will forever be grateful for.
“It has certainly been a huge motivation for me to earn back the trust that I lost, it was a searing experience that I went through. I felt a huge amount of shame and humiliation and wanted to do what I could to create value, earn back trust and build something that ultimately people loved.”
That lifetime ban also seems to rankle, though Blodget says he has no intention of ever working in the securities industry again.
“The way I’ve always felt is that I got what amounted to a dishonourable discharge from the securities industry,” he says. “If there ever came an opportunity where it made sense from a personal perspective, I might reapply to the industry to be restored, if it is possible. But that would very much be a personal thing, rather than going back and working in the industry.”
It's hard to see such a decision ever being made in Britain, where the stigma of perceived failure still lingers far longer than it ever does across the Atlantic. If Blodget's honour is restored, it would be another tribute to the second chance that America is famous for giving to people whose first business ventures somehow came off the rails.
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