Feel like doing another quick #TalesFromInvestmentBanking

1/n In 1996, in between pooning on his interns and totally not doing anything wrong with Epstein, Bill Clinton signed the Telecommunications Act of 1996, which blew the communications services market wide open. At the same time, wireless and the internet were coming on strong..

2/n The four years following the 1996 Act were a bonanza of capital raising as existing and new companies raised gobs of debt and equity to buy spectrum, lay fiber, deploy networks etc., (the backbone of what became the .com bubble on this infrastructure).

3/n You had CLECs, BLECs and all kinds of other companies coming to market almost daily with capital raises. However, there was a big problem - there wasn't really enough money to fund the massive operating losses AND the capex nut. This was a prob for network equip vendors...

4/n As any good CFO will tell you, you have to build to peak demand. That way, when the cycle turns, you go through the windshield at 200mph instead of 60mph. You don't want to be lying on the ground in agony - you want to be dead. And you'd be long gone w/ stock options.

5/n what ensued was an orgy of "vendor financing" by equipment vendors. Have an upstart CLEC with a CCC credit rating, swimming in debt and cash burn? Not a problem, just loan these dorks money to buy your equipment. Revenue secured.

6/n the less dumb customers played the vendors off of each other - I'll pay you a discounted price on equipment, and you'll loan me the money to buy it from you at 0%. Networking equipment CFOs didn't give a flying fuck - stonk market just wanted "growth"

7/n At the time "technology" investment banking was relatively narrow - private placements, IPOs, and M&A. IT was generally heavy lifting work. But when the large networking companies started raising money $500M at a time, very often, technology MDs were all

8/n You could make $5 million in a morning with almost no work. You walk into the office and the syndicate desk tells you "we just got 20% of a $500M Shnortel deal at a 5% underwriting commission". Boom, $4 million in the door before you could even throw your first tantrum.

9/n And given you weren't the bookrunner, you didn't even have to sell any of the prefs, bonds, or whatever. Shelf prospectuses made it even less work. But a problem developed....

10/n As communications companies were relying on moar and moar vendor financing, coupled with the fact they they were basically walking dead companies anyway, they were raising less capital themselves, directly.

11/n Back then, i-banks were starting to organize into "teams", so the mining team does mining, the real estate team does real estate etc. You also had the obligatory "diversified" group to get the miscellaneous stuff, and were also the first to get shitcanned in every downturn

12/n The star communication group, having coined it in the early days post the 1996 Act, was seeing revenue declines, shaving some millions (but not too many millions) from the bonuses of communications MDs.

13/n So the communication bros and sis's decided among themselves that networking hardware and software was really "communications" after all and came around looking to steal all of that revenue from the tech bros.

14/n The weak upper management didn't really give a shit, as they got a cut of everyone's pie, and to preserve the "franchise" just handed over a big % of the business to them. And by "business", I mean doing nothing and collected millions of dollars a week.

15/n Once the tech bubble burst and both carriers and networking vendors started collapsing, they suddenly became technology companies again. Good chuckles were had by all. #TalesFromInvestmentBanking