April 23, 2003
From the desk of Jane Galt:In other news, Frank Quattrone, whose meteoric rise to the top of the tech-banking heap was always too good to be true, has been charged with obstruction of justice for allegedly advising (telling?) colleagues and employees to destroy documents related to how they allocated IPO's.
Which is dumb, because it was an open secret that banks allocated IPO stock to favored clients, who flipped the stock almost immediately for a practically guaranteed profit, in exchange for lucrative banking business. Destroying documents wasn't going to fool anyone.
On the other hand, if you were in on the dot-com scam, I suppose it must be easy to believe that everyone else is easily fooled.
Posted by Jane Galt at April 23, 2003 11:46 AM | TrackBack | Technorati inbound linksKeep in mind that what Frank was alledged to have done was promise startup CEO's of upcoming IPOs an allocation of IPO stock of the company just in front of their own as a way to get around the waiting period if they went with CSFB.
So if dot.com A says I'm thinking about going public, Quattrone would say, well if you go public with us in April, we have high-flying Dot.com B going public in March, I'll give you x thousands of shares of dot.com B if you use CSFB to handle your IPO that way you don't have to worry about selling your own company's IPO shares to make a few bucks.
There's a big difference in that kind of behavior (in which stock is given as a bribe) and simply letting favored high-net worth clients buy in on an investment after they already have a lot of their business.
"So if dot.com A says I'm thinking about going public, Quattrone would say, well if you go public with us in April, we have high-flying Dot.com B going public in March, I'll give you x thousands of shares of dot.com B if you use CSFB to handle your IPO that way you don't have to worry about selling your own company's IPO shares to make a few bucks."
Could one make a case that this was a corrupt form of regulatory arbitrage to get around the six-month lock-up time, I wonder?
I said, "Keep in mind that what Frank was alledged to have done was promise startup CEO's of upcoming IPOs an allocation of IPO stock of the company just in front of their own as a way to get around the waiting period if they went with CSFB.
Then Tom said, "Could one make a case that this was a corrupt form of regulatory arbitrage to get around the six-month lock-up time, I wonder?"
*sigh.*
I was under the impression that the lockup period is not a regulatory requirement, but is part of the agreement between the underwriter and the company. Is this incorrect?
It sounds like an odd game, though. "If you let me underprice your shares I'll let you have some of this other company's underpriced shares."
I hope the clients get nailed too, since agreeing to this is thinly disguised theft from their own companies.
What clients? They're all bankrupt. That's the beauty of the scheme.
"Then Tom said, "Could one make a case that this was a corrupt form of regulatory arbitrage to get around the six-month lock-up time, I wonder?"
*sigh.*"
Yeah, it was obvious. But if it's a form of regulatory arbitrage, wouldn't the perscription for the cure be somewhat different than "lock 'em up". Like, reduce the no-insider sale of stock time to three months?
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