Declining Analyst Coverage Leaves a Quarter of Companies Unmonitored

Public markets rely on transparency through consistent accounting and disclosures, which enables better valuations, efficient price discovery, and optimal asset allocation.

Professional equity analysts are a critical part of this ecosystem.

Their reports regularly influence stock prices, offering expert analysis on industry landscapes, competitive dynamics, financials, valuations, and company-specific risks, along with price targets and buy, hold, or sell ratings.

These reports are invaluable for institutional and retail investors deploying capital, helping to determine a company’s cost of capital, which impacts its ability to raise funds for growth and hire.

However, not all companies receive analyst coverage.

A Growing Blind Spot: The Consequences of Zero Analyst Coverage

A quarter of U.S.-listed companies currently have zero analysts covering them, and Bloomberg research shows this share has been rising over the past decade.

This lack of coverage is detrimental: research indicates that losing analyst coverage leads to information asymmetry, widening spreads, falling prices, and reduced investor demand.

Chart 1: A Third of U.S.-Listed Companies Have Zero or One Analyst

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The Unbundled Economy Struggles to Support Smaller Companies

Data indicates that small size is the primary factor hurting coverage. The average market cap for uncovered companies is around $230 million, with the median under $50 million.

Conversely, every company in the Nasdaq-100® Index has analyst coverage, averaging about 35 analysts, with some mega-caps covered by over 60.

The coverage gap for smaller firms stems from multiple factors, including shrinking commissions, the rise of passive investing, industry consolidation, and regulatory shifts.

These shifts have disrupted the economics of coverage, where costs (salaries, tools) must remain below revenue (commissions, fees).

Unbundling offers no solution. In Europe, unbundling commissions reduced coverage for small caps, and in the U.S., trading-focused competition erodes the economics needed to support smaller, emerging companies.

Nasdaq has attempted to address this twice: the Independent Research Network (2005–2007) and a partnership with Morningstar in 2010, but neither succeeded economically.

Inclusion in major indexes helps—the average Russell 3000 company has 11 analysts—but over 125 companies in the index still have zero coverage.

Chart 2: Analyst Coverage Correlates with Market Cap

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Analyst coverage is vital for investors; their reports keep markets informed, ensuring efficient prices and better capital allocation.

While the SEC focuses on bringing IPOs to market, it should also consider this issue. Markets must function well for all companies to help U.S. households save for retirement and secure their financial future.

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