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Credit Suisse First Boston Fined $100 Million
A couple of people wrote in to note that Credit Suisse First Boston, which was the underwriter for VA Linux ? ' IPO, has been fined $100 million for actions they took in that and other high-tech IPO's during the stock market boom. CSFB allocated shares of certain IPO's to customers who made kickbacks to CSFB. Here's their side of the story. There's also an additional statement by the regulators and CSFB's settlement agreement (PDF).
GASP! Now they're only worth $20 trillion.
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this is why people form corporations.
remove corporate "status" people would go to jail.
Why do you think corporations exist, to help consumers? hahaha
The Kruger Dunning explains most post on
I wouldn't be surprised if a few other brokerages will get nailed pretty soon, for similar kinds of shennanigans. Disclaimer: I have no direct knowledge of any regulatory investigation of ETrade, but we all know that they pretty much played the same games with RHAT.
At least with CSFB did in fact give a handful of shares to everyone who applied for the friends-in-family deal - AFAIK - while ETrade tried to come up with every excuse in the book to kick out as many people as they could in their friends-and-family program. Although some of us did eventually get our pound of flesh (see my website: E*Trouble to revisit those exciting times) it would be icing on the cake to see EGRP whacked on the balls, again.
VA Linux, which, if you're like me, you have your retirement savings invested in
I have this strange urge to laugh and cry at the same time...
Wealth measured in stock is purely a matter of belief and confidence. If everyone believes your stocks are worth something, then they will be willing to pay a price for them.
If circumstances change and confidence goes, then people no longer believe your stocks are worth anything and so no-one will pay any more. The upshot? Your wealth has evaporated.
Of course, a counter argument would be that, with stocks, you never had any wealth in the first place. You merely had the potential to try and convert paper figures into reality.
Cheers,
Ian
When confidence dries up in enterprises that borrow money, risk is perceived to increase and people that hold assets are less likely to lend it out, decreasing liquidity. Less liquidity means less money available for investment, which is the primary negative effect on the economy as a whole when things like Enron and this IPO thingy happen.
A government can try to increase liquidity through a number of means, reducing risk by buying off bad loans so troubled banks will be more likely to lend money, issuing more currency, and buying back government bonds are a few of the tools available to governments. Many people think Japan's only way out of its current recession is to bail out its banks, many of which have a bunch of bad loans on the books and are very adverse to new loans, thus preventing GDP growth since new businesses and business expansion is driven through bank loans (as well as stock.)
personal attacks hurt, especially when deserved
Let's go a step further and say you use your greenbacks to buy some property. Now, that property might be yours, but its worth depends entirely on what people are prepared to give you in exchange for it.
In my view, the wealth you can accumulate in the stock market is no more real or illusory than any other type of wealth. It's just *much* more volatile (and as such is risky to borrow against - margin calls and all that).
Any sufficiently advanced technology is indistinguishable from a rigged demo
--Andy Finkel (J. Klass?)
Okay, so they (finally) nailed CSFB. How about the other side of that transaction? All those clients that made all those millions - they just live happily after? From the news releases, CSFB was stupid enough to keep records in nice spreadsheets, so it should be easy to identify and fine the clients too.
The cynical view says it won't happen - the brokers like to keep the clients happy.
Not that I agree with this argument, but I've heard it posited that if a person isn't a danger to society, his crime should ideally be punished with fines rather than jail time since putting someone in Jail who could be creating wealth creates waste.
Of course, if these people had to take responsibility for their lilly white asses and spend their time in a real max security jail cell this shit wouldn't happen. Either that, or you'd have prison reform really quick.
___
It's the end of my comment as I know it and I feel fine.
Because the "charge" involved a violation of SEC and NASD regulations, not a criminal charge (e.g., Murder.) The $100m is a combination of "disgorged profits" (you have to love the legalese) and a fine.
This has nothing to do with "the Swiss" -- CSFB is a multinational.
It's Linux, damnit! Pay no attention to renaming attempts by self-aggrandizing blowhards.
Yeah, but when you pay the fine on a ticket, it's a couple bucks and they jack your insurance some. We're talking US$100,000,000 here.
I can't exactly see a bunch of suits smoking fat cigars in the boardroom going "Yeah, yeah, it's only a hundred mil. Sign the back of the motherfucker and send it in."
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As a former Bank manager in Austin.
If you were a former bank manager in Austin, and you didn't know how these things worked, then either you worked at a blood bank, or I should move my money somewhere else.
It all has to do with the fact that we, as a society, are willing to assign wealth to unrealized assets (unsold stocks, options, bonds, etc..). And when the value of the unrealized assets drops, we perceive a decrease in the wealth of the individual that holds them.
For example, I would guess that our good friend Bill Gates probably has somewhere in the 20 - 30 million dollar range of true assets (this would include his houses, trust funds, cars, wife's jewelry, greenbacks in his wallet, gigantic money vault in which he swims, etc..) However, we peg him at $74.645400 billion because he holds somewhere in the area of 141 million shares of Microsoft (plus holdings in other areas). So when the stock price of Microsoft tanks tommorrow morning on news of the AOL suit (from $66 down to about $60), then we would say that Gatesy-boy had "wealth evaporation" of $846 million dollars. However, he still has his houses, cars and wife's jewelry - so his assets have not changed, just his potential.
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The extraordinary thing about this is how lightly CSFB (and the street as a whole) is getting off. The profits from inappropriate IPO allocations alone substantially exceeded the penalties.
No penalties will ever be assessed against the hundreds of analysts who hyped internet stocks in exchange for those companies giving their firms a slice of the investment banking business.
Ask any analyst from any wall street firm, sell side or buy side, and they will tell you that everybody does this. Compare the SEC's treatment of big firms doing outwardly crooked things to their treatment of the little guy.
It looks like they're too busy busting 15-year olds to attack the real stock manipulators.
Ever heard the expression "Boston Wad" or "Pigeon Drop?" It's a con game where you get a roll of dollars, then add a fifty to the top. Wrap with elastic band.
Then you find your mark, and agree to go drinking. Show him the huge wad of "fifties". Drop it (with him in tow) in a locker or safety deposit box and keep the key.
Later on in the evening, get a phone call/page or something telling you to get out of town or whatever. (This works really well if both of you are dopers/criminal element) Suggest to your new friend that you need to boot out of town and could he grab you $400 from the ATM for bus fare, etc? He's totally entitled to keep the $1000 in the locker - you haven't time to get it and get out of town and are willing to eat the loss in order to save your neck.
You get the $400 and split. Your "friend" finds out his wad was worth $75 or so.
Dotcoms were pigeon drops. Legal ones. "Oh, uh, yeah, this stock's going to be the next Microsoft. Want mine for $100 a share? I made enough money on it having bought in at $3 a share!"
--- Jump!! Fire!! Bullet time!! - Lego version of the Matrix
A back-of-the-napkin calculation shows that $36M to now be $350K. Of course, to be fair, that still ain't exactly hurting. But yeesh, hindsight makes "Surprised By Wealth" one seriously painful read...
And even richer a read, given CSFB's plight, is the ZDNet article on the subject of ESR's fortune, which, with unintended irony, observes: Yeah. It's been answered alright.
I think most people know that VALinux (or is it VAsoftware now?) owns Slashdot. And for those who don't know I don't really think it's that relevant in this case. This has to do with CSFB's underhandedness with VA stock, not something VA did itself.
autopr0n is like, down and stuff.
Thats Close To the Capitilization of LNUX.
http://finance.yahoo.com/q?s=lnux&d=t
But thats right, there are no real viable Linux based companies anymore, and their really never were.
I'm still working on a clever footer.
The wealth DOESN'T evaporate. Stock is a medium between cash and physical assets. When you start a sole proprietorship, you invest in the business by buying things like desks and chairs and employee salaries out of your own pocket. Your return on investment (revenue-expenses=profit > /dev/pocket) is analogous to dividends. Now, move up to a partnership. Same thing basically, but multiple investors and therefore votes on how that investment is spent (ideally anyway). Next, jump to a corporation: EXACT same thing as a partnership with these mere differences: you're only limited to what you explicitly invest, you can't actually sell off what you invested in (only the holding on it, the stock - unless you get a majority of voting shares to agree), and it's possible to not have a controlling interest. That's what stock is, and yes - you needed to know it to understand what follows.
Here's where people get confused: Stocks are an asset like anything else. My computer is an easy example. I may consider it to be worth $5k, but Bob might only be willing to stick $3k for it. People, expecting a return on their investment, will be willing to pay just so much for something. Stock prices are basically the price of what people are willing to pay to buy the all the stock, just as my Linksys router is as high a price as the manufacturer can get away with. Somebody might be willing to sell me one for only $50, or I may decide to hoard as many as I can and people seeing an opportunity in this will offer it for $200, which I might be willing to pay for it. Now, what if tommorow a major unfixable bug was discovered in all the linky's that the manufacturer couldn't fix and wouldn't replace? Now nobody is willing to pay for them. I'm basically out what I spent. Now this is what almost nobody understands - I DIDN'T LOSE THAT MONEY, I spent it like I would on anything else. Whoever sold me that stock (the linky) got $X dollars. I've already lost it. It didn't evaporate, it just changed hands. Look above to understand how the supposed "value" of a stock fluctuates, but it's really nothing more than what other people value it at.
So, why do people become "broke" if they've already parted with their money? Imagine taking out a loan on your car. Because your car is an asset, you can have equity on it. No more than what other people value it at (Blue Book being the definitive guide here), but it's there. People use equity on their stocks just like they do on their car. But if you crash the car... you know what happens. Equity in a stock is just the same thing - only it's not on what you own, it's on what the business owns. Just like if I opened a convenience store and took a mortgage on the building.
SIG: HUP
if EVERYBODY were allowed to participate with an IPO.
For some reason only "privilidged" people are allowed to buy the stock before it starts. So why do we allow the rich to get richer? Everybody should be able to buy those stocks before trading starts.
No exceptions.
"A plan fiendishly clever in its intricacies"- Homer Simpson