A Cantor Fitzgerald Securities Inc. analyst shocked Wall Street with a scathing report that openly mocked Annaly Capital Management Inc.’s disclosures on conference calls with analysts and investors.</p>
<p>The report by Cantor’s Michael Diana, dated Nov. 17, cited Annaly as his least favorite among real-estate investment trusts that own mortgage-backed securities and launched into an imagined commentary about executives’ performance during quarterly conference calls. Annaly is the largest mortgage REIT, with a market capitalization of nearly $16 billion.</p>
<p>Diana wrote that his “take” on the conference calls–which he said was “exaggerated for emphasis”–was to help investors understand examples of weak transparency from Annaly, while also criticizing the analysts who follow the firm. Annaly borrows funds to invest in bonds issued by Fannie Mae, Freddie Mac and Ginnie Mae.</p>
<p>The speaker in a concocted transcript launches into Annaly Chief Executive Michael Farrell, calling him “Master of the Mortgage Market” who will “pontificate about anything and everything except what Annaly actually did during the quarter.”</p>
<p>Among the story line, Diana wrote “Pandering is not only permitted, but encouraged. In fact, ‘questions’ that are not prefaced by ‘Mike, those were brilliant insights!,” or other similar comments designed to place your firm on the cover of the next Annaly offering, will be frowned upon.”</p>
<p>Diana has worked at Cantor for less than a year, according to people familiar with the analyst. A Cantor spokeswoman said the firm doesn’t comment on employee matters.</p>
<p>“We don’t comment on analysts who cover us or what they write,” said Jay Diamond, managing director of Annaly. “As a general matter, though, we welcome any concerns or opinions that are provided by the analyst community, or any of the investors that follow us.”</p>
<p>A call to Diana’s office wasn’t answered and a voicemail message on his mobile phone wasn’t returned.</p>
<p>While analysts can be tough on the corporate-governance policies or business tactics of companies they cover, rarely are criticisms this vitriolic, especially in typically mundane research reports.</p>
<p>“Professionalism is always key and it’s best to stick to fundamentals rather than going beyond that,” said Jason Arnold, an analyst at RBC Capital Markets who covers mortgage REITs. “When you start going outside the envelope, you’re not really doing the job you’re supposed to do…[which is] analyzing the value of the company and the value of the stock and evaluating performance.”</p>
<p>Nonetheless, it appeared that some of Annaly’s rivals are enjoying a bit of schadenfreude.</p>
<p>“He’s now the Mike Mayo of the REIT industry,” said one head of a competing mortgage REIT, referring to the managing director at Credit Agricole Securities who is known for championing sell calls on financial companies.