By: Cydney Posner

Nasdaq and Reuters have announced the formation of a new company, the Independent Research Network, to help public companies obtain independent analyst coverage. See:  Press Release.

The new company will not play any role in preparing the research or issuing recommendations. Rather, it will aggregate multiple, independent research providers to procure and distribute equity research on behalf of under-covered companies. The service will be targeted to all companies listed in the U.S. as well as private companies looking for research coverage.

Nasdaq's CEO reported that approximately 1,200 of Nasdaq's 3,200 listed companies have no research coverage. In addition, according to publicly available data, approximately 50% of all publicly held companies have two or fewer analysts, and approximately 35% of all public companies have no analyst coverage. Reuters Estimates reports that, since January 2002, 691 companies have lost analyst coverage, representing over 17% of the entire universe of companies with analyst coverage.

To preserve the independent nature of the new company, IRN will establish a "Research Independence Panel," composed of experts in the legal, research and regulatory fields, whose objective is to ensure the integrity and independence of the research. IRN will deliver multiple research opinions per issuer over a multi-year contract term. Reuters will provide research aggregation and distribution technology to IRN, including "an innovative content management solution that was developed in connection with the Global Analyst Settlement."

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