Frank Quattrone was one of the most powerful figures during the dotcom bubble. He was one of the first investment bankers to recognize the potential of the fledgling companies in Silicon Valley and established himself on the ground floor long before venture capital flooded in.

Quattrone was known and trusted by the entrepreneurs and, as the bubble heated up, he acted as the middleman between them and the venture capitalists looking to get in. His understanding of the needs of technology firms versus the demands of investors made him a rainmaker of extraordinary value. As the lead of Morgan Stanley's Global Technology Group, Quattrone ushered in the Netscape IPO - the largest IPO in Wall Street's history at that time. When he sought more power over analysts issuing reports on his IPOs, Morgan Stanley refused and watched as their rainmaker jumped ship.

Quattrone changed employers several times during the boom, receiving more money and power at each stop. At Credit Suisse First Boston, he was granted control over the compensation system for analysts and his own people in the IPO section. Quattrone also gained control over the pre-IPO share allocations he gave to potential clients in order to attract business. Using the double incentive of favorable analyst recommendations and a kickback in pre-IPO shares, Quattrone attracted more internet firms to CSFB than any other investment bank. The fees paid to CSFB for handling an IPO were not cheap, but the personal compensation given to the CEO through spinning put the CEO's personal desire above the interests of his or her company.

After the internet boom went bust, Quattrone was targeted by the NASD for breaking down the Chinese Wall. He sent a controversial email to his employees reminding them to follow procedure in destroying any documents related to the upcoming case. With vital evidence now deleted, that email became the smoking gun that hinged the case. Quattrone did not bring about the internet boom all by himself, but every other investment bank mimicked his strong arm tactics with their analysts. Investors, sadly, took many of the analysts on their word. The total cost to investors on the internet bubble has been estimated as high as $5 trillion. Further, a general loss of faith in Wall Street followed the "revelation" that analysts were far from impartial. Although Quattrone was convicted on circumstantial evidence in a second trial, his conviction was overturned on appeal in 2006. Throughout the trial, CSFB stood behind their rainmaker and his business tactics.

(For more on the dotcom bubble, read Crashes: The Dotcom Crash.)

This question was answered by Andrew Beattie.

  1. How has investing in the Internet sector evolved over time?

    Learn how early investors of the Internet sector received a valuable lesson and influenced modern-day markets after the dot-come ... Read Answer >>
  2. What is an echo bubble?

    To understand the term "echo bubble", you have to understand what a bubble is. A financial or economic bubble occurs when ... Read Answer >>
  3. What average annual return has the internet sector historically generated?

    Learn about the performance of Internet stocks, one of the newest types of investment sectors, and discover how stock bubbles ... Read Answer >>
  4. What did Knight Trading Group do to incur a $1.5 million fine for violating trading ...

    The dotcom boom accelerated many deceitful business practices that first became apparent during the '80s and '90s. Many of ... Read Answer >>
  5. What are the main reasons for investing in the internet sector?

    Explore key reasons for investing in companies in the Internet sector. Learn about leading companies delivering products ... Read Answer >>
Related Articles
  1. Investing

    How Does a Bubble Form and Burst?

    A bubble forms when prices grow beyond their true value.
  2. Small Business

    Why Social Media Isn't Like The Dotcom Boom

    Many investors see social media stocks as a bubble waiting to burst. Find out why they're wrong.
  3. Investing

    Tech Bubbles: How the Dot-Com Era Differs From 2016 (AAPL, CSCO)

    Pay attention to the escalating valuations of pre-IPO companies in 2016, as several will rise above the $10 billion level before going public.
  4. Insights

    How Do Asset Bubbles Cause Recessions?

    Understand how asset bubbles often lead to deep, protracted recessions. Read about historical examples of recessions preceded by asset bubbles.
  5. Investing

    Five Of The Largest Asset Bubbles In History

    The five bubbles discussed here were among the biggest in history; their lessons should be heeded.
  6. Investing

    How To Value An Internet Stock

    An academic study, published several years after the peak of the dot-com bubble in March 2000, accurately described just how whacky internet valuations grew until the bubble burst. The study's ...
  7. Insurance

    Failed IPOs Of The Dot-Com Bubble

    We look at some of the most infamous flops of the first dot-com bubble.
  8. Investing

    Dotcom vs. Today: 3 Reasons Why U.S. Equities Are More Dangerous

    Explore the factors that make the end of the current bull market more dangerous than the dotcom bubble, and why investors may have no place to hide this time.
  9. Insights

    5 Steps Of A Bubble

    Bubbles are deceptive and unpredictable, but by studying their history we can prepare to our best ability.
  10. Investing

    Avoid The Bubble And Protect Your Portfolio

    As the S&P 500 delivered a 19.7% annualized gain over the past six years, talk of a market bubble has emerged. Concerns of a bubble in prices are not just being voiced by perma-bears like Nouriel ...
  1. Rainmaker

    A broker or financial advisor who brings a large number of wealthy ...
  2. Internet Bubble

    A rapid rise in equity markets caused by speculation into online-based ...
  3. Tech Bubble

    A pronounced and unsustainable market rise attributed to increased ...
  4. Bubble

    1. An economic cycle characterized by rapid expansion followed ...
  5. Echo Bubble

    A post-bubble rally that becomes another, smaller bubble. The ...
  6. Pledge Fund

    A special type of fund in which members of the fund work toward ...
Hot Definitions
  1. Assets Under Management - AUM

    The market value of assets that an investment company manages on behalf of investors. Assets under management (AUM) is looked ...
  2. Subprime Auto Loan

    A type of auto loan approved for people with substandard credit scores or limited credit histories. There is no official ...
  3. Racketeering

    A fraudulent service built to serve a problem that wouldn't otherwise exist without the influence of the enterprise offering ...
  4. Federal Debt

    The total amount of money that the United States federal government owes to creditors. The government's creditors include ...
  5. Passive Management

    A style of management associated with mutual and exchange-traded funds (ETF) where a fund's portfolio mirrors a market index. ...
  6. Series 7

    A general securities registered representative license administered by the Financial Industry Regulatory Authority (FINRA) ...
Trading Center