Just when you think nothing ever changes when it comes to sell-side research, something happens that prompts you to rethink. I am referring to a Deal Journal item about Morgan Stanley research analysts coming out with a hold recommendation on would-be Internet darling Pandora, which went public recently.

What makes this intriguing is that Morgan Stanley was one of the lead underwriters of the firm's IPO, along with JP Morgan and Citigroup, both of whom came out with enthusiastic buy recommendations as they initiated research. For Morgan Stanley to buck the trend is a good thing for the sell-side research industry, which would like to counter the still-lingering notion that research analysts are still working in league with bankers.

The global settlement that followed the dotcom era was supposed to rectify that, and in many ways it has. Public perception of course is another issue. Stifel Nicolaus was also an underwriter, and its research staff also issued a report saying the firm was fairly valued at the current price.

It's nice that an investment bank of Morgan Stanley's stature can allow for a multiplicity of opinions across the bank's units. At the same time, I wouldn't exactly think that this went unnoticed. Not that the bankers still have any influence over the research staff, but it may be just uncomfortable enough for analysts that they might want to voluntarily shy away from controversy. 

For more:
- here's the article

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Pandora prices at $16 a share as Internet stock bubble continues