Home » How Credit Suisse redefined the IPO market during the Dot-Com boom—then lost its grip and spiraled into scandal

How Credit Suisse redefined the IPO market during the Dot-Com boom—then lost its grip and spiraled into scandal

It’s hard to imagine now, but there was a time when Wall Street simply didn’t take Silicon Valley seriously. 

New York, with its financial powerhouses and bankers with slick backed hair, was where the action was in the 1980s. California was a backwater. That is, until Frank Quattrone got interested in the fledgling tech companies popping up on the West Coast. As Fortune memorably wrote in 2001: “Quattrone came to Silicon Valley in the early 1980s, a time when the big Wall Street firms regarded tech banking as just an interesting niche business. But Quattrone believed that the tiny, struggling companies that then made up the tech galaxy were destined to become fast-growing giants. Building relationships with them was certain to pay off, he argued, even if it took a long time. All that, of course, seems obvious in hindsight. But at the time it was revolutionary. ‘He was the first guy in the New York investment banking world to take Silicon Valley seriously,’ says well-known tech investor Roger McNamee. “He was the first guy at a major firm who bet his career on Silicon Valley.’”

And what bets they were. While at Morgan Stanley, Quattrone took the networking company Cisco Systems public in 1990. He followed this up with Netscape in 1995, which was the IPO heard around the world. In 1996, Quattrone decamped to Deutsche Bank, leading the Amazon.com offering a year later, and then in 1998 he moved over to what was then called Credit Suisse First Boston. When he joined CSFB the bank was an also-ran in IPO circles. But with Quattrone at the helm, the bank began underwriting some of the hottest IPOs including the offerings from discount brokerage TD Waterhouse; Garmin, maker of GPS devices; and Fairchild Semiconductor. The excitement and overnight riches being created were staggering. One Quattrone-led IPO, hardware seller VA Linux, soared nearly 700% in its first day of trading in December 1999.

Credit Suisse as we know it is no more. The Swiss government has successfully pressured UBS to buy the 167-year-old bank for $3.2 billion, marking the end of an era for a bank that was once one of the biggest players in the U.S. IPO market. But the tale of how Credit Suisse led the IPO craze of the late 90s, then spiraled into scandal (and eventually distress), is a fascinating look at how an entire organization—and even entire industries—can be shaped by a singular personality, whose influence lingers long after they have moved on. 

The Tech Age

Quattrone grew up in South Philadelphia, the setting for the movie Rocky. It is an image Quattrone relished. He sought to present himself as a scrappy, street-smart outsider. He wore ugly sweaters, grew a bushy mustache and organized karaoke sessions at client outings. However, that anti-banker persona was a bit misleading. Quattrone has an undergraduate degree from Wharton and an MBA from Stanford. By the time he took Netscape public, Quattrone had spent 17 years at Morgan Stanley. The reason Quattrone got into high-tech investment banking? Steve Jobs. As Quattrone told Fortune in 2011, Jobs came to his Stanford business school class waving the prospectus for Apple’s IPO and telling the class how PCs would change the world. This was 1980. Jobs, who was 25 at the time, told the students, including Quattrone, that he had traded his VW van for stock that would soon be worth hundreds of millions. “Here’s a guy my age, who had just created a company that Wall Street was about to value at a billion dollars. So that’s what got me really focused on, you know, people who like to change the world in Silicon Valley,” Quattrone said.  

Though he cut his teeth at other Wall Street institutions, Quattrone fully hit his stride once he moved to CSFB. As head of the bank’s technology group, CSFB vaulted to the top of the underwriting ranks. As the bank lured tech clients to underwrite their IPOs, the research arm churned out analyst reports touting the stocks of the companies that had just gone public, piquing institutional and retail investor interest in dot-coms. In 1999 and 2000, Credit Suisse managed more Internet and technology IPOs than any other firm. It also made Quattrone very rich. The star banker may have earned as much as $100 million, Fortune said in the story. 

“It was always an exciting place to be,” said Victoria Harmon, who spent nearly 15 years at Credit Suisse, joining as a vice president but finishing as a managing director in corporate communications. Harmon, when she was VP, handled press for Credit Suisse’s equity capital markets team, which included the bankers responsible for IPOs. It was her team that put out announcements publicizing the offerings led by CSFB, which were often oversubscribed, meaning the IPO had more interest in shares than what was available. It was also Harmon and her group, along with the litigation team, who handled the blowback for any scandals or investigations that might have included Credit Suisse. “I woke up every morning never [knowing] what the day would bring,” Harmon said.

Harmon said she had a good relationship with Quattrone but that the star banker and his team operated relatively independently within Credit Suisse, with his own press representative in Palo Alto, California where he was based. In the late 1990s, three investment banks—Goldman Sachs, Morgan Stanley and Credit Suisse—dominated IPOs.  But Credit Suisse outpaced its rivals, leading more new issues in 1999 and 2000 than either Goldman or Morgan Stanley, according to Matt Kennedy, senior IPO strategist at Renaissance Capital, a provider of pre-IPO research and IPO ETFs. Credit Suisse led 114 IPOs for the two years, while Goldman ranked second with 107 and Morgan Stanley came in third with 83, Kennedy said. “We appreciated the competition,” Harmon said.

CSFB was riding a lofty moment for tech IPOs. This was during the dot.com bubble, which refers to the period 1995 to 2001, when internet-related technology companies raised more money from venture capital and Wall Street investors than ever before. The phenomenon coincided with the rapid adoption of the Internet. Shares of these companies typically soared in the stock market. The S&P 500 nearly tripled its value by the end of 2000. That year, the bubble began bursting when stocks sold off and IPOs slowed. There were technology layoffs and several dot.com successes, like Pets.com and Webvan, failed. Between 2000 and 2002, the S&P 500 lost 40% of its value.

The downfall of Credit Suisse

For Credit Suisse, the problems were just beginning. Quattrone was accused of obstruction of justice after he replied to an email that reminded CSFB staff about the firm’s document retention policy. He left CSFB in 2003. A year later, in 2004, Quattrone was found guilty of obstructing justice for sending out the email. The case was overturned on appeal and charges were dismissed in 2007. Quattrone declined to comment to Fortune

A government investigation into Credit Suisse’s IPO practices caused the bank, in July 2001, to oust its CEO, Allen Wheat, who had hired Quattrone. In 2002, CSFB paid $100 million to settle charges from the National Association of Securities Dealers and the SEC that the bank inflated commissions to some customers in exchange for getting shares of IPOs. This settlement was a prelude to the research scandal of 2003, when 10 investment banks, including Credit Suisse, Goldman and Lehman, paid a combined $1.4 billion to settle allegations that the firms issued biased stock ratings to get investment banking business.

Several years later, a subprime mortgage crisis caused the collapse of several banks in 2008, including Bear Stearns, Lehman Brothers and Washington Mutual. Curiously, Credit Suisse wasn’t as severely impacted as other banks, Harmon said. “One of the few times we felt relatively safe with the business and CS’s future was after 2008. We didn’t rely on government and taxpayer bailouts like the other banks,” she said.  However, it did have the only U.S. banker, Kareem Serageldin, who went to jail for the global financial crisis. Serageldin, the global head of structured credit group at Credit Suisse, was convicted of artificially inflating the prices of subprime mortgage bonds.

By 2008 Quattrone had resurfaced, co-founding Qatalyst Partners, a very successful boutique investment bank focused on technology. The San Francisco-based firm has advised on some of the biggest recent mergers including Adobe’s $20 billion buy of Figma (the deal was announced in September 2022) and LinkedIn’s $26.2 billion sale to Microsoft in 2016. Quattrone, who is 67, stepped down as Qatalyst’s CEO in 2016 and is now executive chairman. Since then, he has mostly stayed out of the limelight and press. 

But his former employer certainly did not manage to stay out of the limelight. More recent Credit Suisse scandals include the U.S. bank’s guilty plea in the so-called “tuna bond fraud” when the bank, in 2013, organized $1 billion in loans for Two Mozambican state-owned companies. The money was intended to buy ships for the coastguard and for tuna fishing but instead part of the money went into private pockets, according to the Basel Institute of Governance, a not-for-profit dedicated to fighting corruption. In 2021, Credit Suisse agreed to pay $475 million to U.S. and U.K. authorities, including $100 million to the U.S. SEC, for fraudulently misleading investors and violating the Foreign Corrupt Practices Act.

Then there’s Greensill Capital, the supply-chain finance company, and Archegos Capital Management, the $36 billion private investment firm that both did business with Credit Suisse. Both failed in 2021 reportedly causing the bank billions in losses.

Credit Suisse in late 2022 unveiled a restructuring plan that called for the spin-off of the investment banking business under the CS First Boston name. That appears unlikely now. UBS is expected to enter talks with Michael Klein, a former Credit Suisse board member who was to be CEO of CS First Boston, to unwind the deal. Credit Suisse also agreed to buy Klein’s advisory firm for $175 million and merge it with the bank’s advisory and capital markets unit. That transaction appears off. (UBS and Credit Suisse declined comment, while Klein didn’t return messages for comment.)

But while Credit Suisse might not be the top dog anymore, it still does well enough to be an attractive target for UBS. Combining Credit Suisse equity capital markets business with UBS would vault UBS to the near top of U.S. underwriters, he said. Kennedy likened the UBS-Credit Suisse transaction to Bank of America’s acquisition of Merrill Lynch in 2008 for $50 billion. “BofA is widely regarded to have overpaid for Merrill, but the bank is now one of top underwriters thanks to that acquisition,” Kennedy said.

Credit Suisse has remained active as an underwriter of IPOs, ranking fifth in the past five years in terms of proceeds and seventh by the number of deals, he said. Credit Suisse has led 25 IPOs in the past five years while UBS has only led one, Kennedy said. (Goldman is the top lead bookrunner, while Morgan Stanley is second and JPMorgan is third, he noted.) “While Credit Suisse isn’t the powerhouse they were 20 years ago, it’s still undoubtedly in the elite group of investment banks when it comes to underwriting IPOs,” Kennedy said.

Credit Suisse also has excellent experience in the tech sector, he said. In 2014, the bank led the $25 billion offering of Alibaba, the biggest IPO ever. “I think you can see why UBS would want to hang onto the business,” Kennedy said.

UBS will certainly offer its Swiss colleague a measure of financial stability. But it would take another Frank Quattrone to bring it back to the 1990s heights.