Every era of excess and greed has its villain and it looks like the Internet IPO boom may have just gotten one.
Frank Quattrone, the star tech investment banker who turned Credit Suisse First Boston into a tech IPO powerhouse, is the first banker to face criminal charges over events that occurred during the bubble.
The charges against Quattrone are critical because he personified the boom and the supernova of tech IPOs, which ultimately became one of the biggest periods of wealth destruction in U.S. history.
”(Quattrone) doesn’t have the name recognition of a Michael Milken, but he certainly seems to be the guy who pushed the envelope in losing the ethical standards in the late 1990s when it came to IPOs,” says Jay Ritter, professor of finance at the University of Florida.
Quattrone denies the charges of obstruction of justice.
His supporters are many, including Richard Kramlich, a longtime Silicon Valley venture capitalist at New Enterprise Associates. He calls Quattrone a ”high-quality guy.”
Even so, the legacy Quattrone left on the tech IPO boom is indisputable in several ways.
Sheer volume. After Quattrone joined in 1998, CSFB went from being the smallest major underwriter of tech IPOs to the biggest one in 1999, says Richard Peterson, market strategist at Thomson Financial Securities Data.
With Quattrone at the helm, the firm has underwritten 89 tech IPOs since the second half of 1998 trouncing No. 2 FleetBoston, which had just 60 in the same period, Peterson says.
Poor performance. On average, CSFB’s tech IPOs are down 33.2% from their offering prices below even the 29.1% loss for the average tech IPO, Peterson says. That performance masks some real bombs including CSFB’s biggest domestic tech IPO: Corvis. The maker of optical networking gear has fallen 98% since going public in 2000.
Ties to analyst research. CSFB has paid $200 million as part of a settlement over allegations of issuing biased research. But resentment still lingers over the links between its banking and research.
Take, for instance, Corvis. CSFB initiated coverage of the company on Aug. 22, 2000, with its strongest buy rating, says Kei Kianpoor, CEO of research tracker Investars. The stock price: $90.81.
Over the subsequent year, CSFB reiterated its strongest buy rating nine times as the stock sank to $6.40. It didn’t downgrade it to a lower buy until it was worth just $2.23 a share.
CSFB declined to comment. But Kianpoor says Quattrone’s position as the king of tech IPOs may have tainted research analysts.
”It might be harder to say ‘no’ to Quattrone,” he says.