WEBVTT - Charles Schwab CEO Rick Wurster Talks SpaceX, Future Big IPOs

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio.

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<v Speaker 2>News, SpaceX seeing historic appetite from retail investors, drawing over

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<v Speaker 2>three hundred and seventy million dollars in demand since Friday.

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<v Speaker 2>Charles Schwab was one of the firms that that brought

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<v Speaker 2>the listing to Main Street. Joining us now, I'm so

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<v Speaker 2>pleased to say is the Schwab President and chief executive officer,

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<v Speaker 2>Rick Wurster. Rick, great to see you. Thank you for

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<v Speaker 2>being with us. I want to start just with how

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<v Speaker 2>you see the retail investor's role in this particular IPO

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<v Speaker 2>and how it highlights in some ways a changed market.

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<v Speaker 3>Well as a breakthrough event. I think for the retail investor,

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<v Speaker 3>who was allocated roughly twenty percent of the deal, which

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<v Speaker 3>is triple a typical IPO. So it's great to see

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<v Speaker 3>retail having a meaningful seat at the table. It created

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<v Speaker 3>tremendous engagement with our clients and broadly with retail clients.

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<v Speaker 3>Demand was off the charts, and that demand continues. We've

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<v Speaker 3>seen in the three days following the IPO nearly seven

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<v Speaker 3>million dollars of additional orders come from our clients alone,

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<v Speaker 3>so lots of interest, a great breakthrough for the retail

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<v Speaker 3>client having a seat at the table was great to see.

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<v Speaker 2>There's a little bit of concern in some corners, albeit

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<v Speaker 2>with skepticism because you never want to bet against an

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<v Speaker 2>entire crowd of people who are going in one direction.

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<v Speaker 2>But Rick there does seem like it's more kind of

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<v Speaker 2>in vibes and support of the ideas of things rather

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<v Speaker 2>than traditional valuations. Does that concern you or does that,

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<v Speaker 2>frankly give you faith in the crowds, the wisdom of

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<v Speaker 2>crowds rather than Wall Street analysis.

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<v Speaker 3>It's tough to know with foresight what the returns will be.

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<v Speaker 3>But I think what's so exciting about the market is

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<v Speaker 3>the level of innovation that you're seeing. And the retail

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<v Speaker 3>investor sees that every day in their life and they

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<v Speaker 3>want to be a part of it. And so you're

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<v Speaker 3>seeing tremendous interest in AI related names and the space names.

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<v Speaker 3>I think it comes from the retail investor being able

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<v Speaker 3>to touch and feel the level of innovation in our economy,

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<v Speaker 3>and I think clearly they're holding names that are doing

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<v Speaker 3>stocks that are doing well with really strong fundamentals. Exactly

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<v Speaker 3>what the returns will be only time will tell.

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<v Speaker 1>This was like a Super Bowl moment for financial markets,

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<v Speaker 1>and we learned that there are war rooms. You set

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<v Speaker 1>up various ones and you increased your team. Can you

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<v Speaker 1>just give us some color, where were you during all

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<v Speaker 1>of this? What was the vibes like in these war

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<v Speaker 1>rooms that you set up.

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<v Speaker 3>It was a pretty amazing event in that it was

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<v Speaker 3>one of the top five most active days for our

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<v Speaker 3>clients in the fifty year plus history of the firm,

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<v Speaker 3>And if you think about all the market events we've

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<v Speaker 3>had over those fifty years, for the IPO to crack

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<v Speaker 3>the top five is pretty unbelievable. We had one hundred

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<v Speaker 3>and forty thousand clients call in live, We had lots

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<v Speaker 3>of digital engagement. It was impressive to see, and our

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<v Speaker 3>teams were fully staffed, ready and able to handle our clients'

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<v Speaker 3>needs that day. It was wonderful to see the teamwork

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<v Speaker 3>and the effort that went into making this a success

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<v Speaker 3>on our side.

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<v Speaker 1>How do you think this is going to establish, potentially

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<v Speaker 1>what's next when it comes to other mega IPOs like

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<v Speaker 1>Anthropic and Open Ai.

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<v Speaker 3>Hopefully it establishes retail having a really strong presence at

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<v Speaker 3>the table. I think it's wonderful for the retail investor

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<v Speaker 3>to be able to participate in something like this, so

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<v Speaker 3>I hope this IPO establishes that. I think it also

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<v Speaker 3>establishes an incredible level of interest among our client base

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<v Speaker 3>for new and innovative technologies and being able to participate them.

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<v Speaker 3>We recently closed a deal with Forge which allows our

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<v Speaker 3>clients to invest in pre IPO companies, So I think

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<v Speaker 3>that the interest around these new ideas and emerging companies

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<v Speaker 3>is quite high and will only continue.

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<v Speaker 2>Charll Rick, the point that you just made is actually

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<v Speaker 2>really important, given the fact that people know that increasingly

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<v Speaker 2>the values being created before the IPO, when companies are

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<v Speaker 2>still private. Do you think that some of these IPOs

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<v Speaker 2>will expedite the efforts to get access to retail investors

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<v Speaker 2>into private markets through a whole host of different ways.

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<v Speaker 3>I do think it will expedite it because people will

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<v Speaker 3>have interest in getting in earlier, because these companies are

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<v Speaker 3>waiting far longer to go public, and so there's a

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<v Speaker 3>lot of value being created while they're private and people

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<v Speaker 3>want in. I know, on the Forge platform these companies

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<v Speaker 3>were brought with much lower valuation. SpaceX in particular, I

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<v Speaker 3>think first came to the Forge platform when it was

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<v Speaker 3>roughly sixty billion in value, and so those investors who

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<v Speaker 3>are able to participate early at a sixty billion dollar

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<v Speaker 3>valuation are seeing it now well over two trillion dollars

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<v Speaker 3>and are enjoying the very significant returns that they had.

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<v Speaker 3>And I think more and more people are getting to

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<v Speaker 3>see and experience these companies that are private. They're benefiting

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<v Speaker 3>from a lot of their technology, and they want a

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<v Speaker 3>way to access the returns that are going to come

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<v Speaker 3>from the innovation that they're driving. So I do think

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<v Speaker 3>it'll create more interest in private companies and we want

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<v Speaker 3>to participate in that.

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<v Speaker 2>What's the demographic of some of the retail investors who

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<v Speaker 2>have been most interested in some of these IPOs? And

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<v Speaker 2>I asked that because it seems like there are some

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<v Speaker 2>generational divides that have emerged in terms of who is

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<v Speaker 2>more actively trading some of the zero dated options and

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<v Speaker 2>other instruments versus the sixty forty crowd that grew up

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<v Speaker 2>in another era. Ye.

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<v Speaker 3>Interesting, we saw demand for this IPO across the demographic,

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<v Speaker 3>from young investors to our older investors, so really high

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<v Speaker 3>demand across the board.

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<v Speaker 1>Are you seeing your retail investors having to move money

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<v Speaker 1>out of certain positions they can get ahead of something

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<v Speaker 1>exciting like the spacexipo.

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<v Speaker 3>A couple things we saw in May more new money

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<v Speaker 3>being put to work, so people taking money from cash

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<v Speaker 3>getting it invested. We also did see some rotation and

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<v Speaker 3>part of what drove the high levels of activity around

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<v Speaker 3>the SpaceX ipo were clients who are repositioning their portfolio

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<v Speaker 3>to free up money to invest in SpaceX. I think

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<v Speaker 3>it's a little bit a combination of both.

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<v Speaker 1>When you look at some of the other brokerages that

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<v Speaker 1>are involved, Fidelity, Robinhood e Trade. Why do you think

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<v Speaker 1>investors should come to you? I know a lot of

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<v Speaker 1>young investors are very excited about Robinhood and also how

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<v Speaker 1>some of their software operates. Why for you, given the

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<v Speaker 1>fact that this is going to be a massive summer

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<v Speaker 1>for IPOs.

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<v Speaker 3>Yeah, I think Schwab is the place to be because

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<v Speaker 3>we've got what we think is the world's greatest trading

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<v Speaker 3>platform and think or Swim. We've got a research and

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<v Speaker 3>education platform that is built with the client first, putting

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<v Speaker 3>information and analysis in their hands to make informed decisions.

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<v Speaker 3>And we have the support and service that can't be matched.

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<v Speaker 3>You know, we had one to one hundred and forty

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<v Speaker 3>thousand client calls, all from tell me what an IPO

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<v Speaker 3>is to how do I actually purchase the IPO and

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<v Speaker 3>how do I get involved? So I think at Schwab

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<v Speaker 3>you get full end to end service from a person

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<v Speaker 3>that can help you with great digital experience, a leading

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<v Speaker 3>trading platform, and the research and insights that are going

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<v Speaker 3>to what your interests at the forefront. So that's why

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<v Speaker 3>if you look at our trading activity, we handle the

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<v Speaker 3>most daily average trades I think by double the next

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<v Speaker 3>largest broker. So we do think we are the premier

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<v Speaker 3>destination for trading in our country.

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<v Speaker 2>Just real quick, real quick, Rick, I'm wondering if the

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<v Speaker 2>FED is more hawkish and does raise rates, do you

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<v Speaker 2>think that that's going to limit some of the profitability

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<v Speaker 2>due to the contracting yield curve.

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<v Speaker 3>For the company or for the company, we're well positioned

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<v Speaker 3>and then if rates rise, that's generally beneficial to our company.

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<v Speaker 3>But we're an all weather business model, and we've got

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<v Speaker 3>three major sources of revenue trading activity, asset management and

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<v Speaker 3>fee based revenue, and then revenue that comes from net

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<v Speaker 3>interest margin. So we have a diversified business model can handle.

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<v Speaker 3>We think a lot of different environments, but in general,

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<v Speaker 3>with the environment that we're seeing around rates, that only

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<v Speaker 3>provides a tailwind for our business.