Speaker 1: Bloomberg Audio Studios, podcasts, radio.
Speaker 2: News, SpaceX seeing historic appetite from retail investors, drawing over
Speaker 2: three hundred and seventy million dollars in demand since Friday.
Speaker 2: Charles Schwab was one of the firms that that brought
Speaker 2: the listing to Main Street. Joining us now, I'm so
Speaker 2: pleased to say is the Schwab President and chief executive officer,
Speaker 2: Rick Wurster. Rick, great to see you. Thank you for
Speaker 2: being with us. I want to start just with how
Speaker 2: you see the retail investor's role in this particular IPO
Speaker 2: and how it highlights in some ways a changed market.
Speaker 3: Well as a breakthrough event. I think for the retail investor,
Speaker 3: who was allocated roughly twenty percent of the deal, which
Speaker 3: is triple a typical IPO. So it's great to see
Speaker 3: retail having a meaningful seat at the table. It created
Speaker 3: tremendous engagement with our clients and broadly with retail clients.
Speaker 3: Demand was off the charts, and that demand continues. We've
Speaker 3: seen in the three days following the IPO nearly seven
Speaker 3: million dollars of additional orders come from our clients alone,
Speaker 3: so lots of interest, a great breakthrough for the retail
Speaker 3: client having a seat at the table was great to see.
Speaker 2: There's a little bit of concern in some corners, albeit
Speaker 2: with skepticism because you never want to bet against an
Speaker 2: entire crowd of people who are going in one direction.
Speaker 2: But Rick there does seem like it's more kind of
Speaker 2: in vibes and support of the ideas of things rather
Speaker 2: than traditional valuations. Does that concern you or does that,
Speaker 2: frankly give you faith in the crowds, the wisdom of
Speaker 2: crowds rather than Wall Street analysis.
Speaker 3: It's tough to know with foresight what the returns will be.
Speaker 3: But I think what's so exciting about the market is
Speaker 3: the level of innovation that you're seeing. And the retail
Speaker 3: investor sees that every day in their life and they
Speaker 3: want to be a part of it. And so you're
Speaker 3: seeing tremendous interest in AI related names and the space names.
Speaker 3: I think it comes from the retail investor being able
Speaker 3: to touch and feel the level of innovation in our economy,
Speaker 3: and I think clearly they're holding names that are doing
Speaker 3: stocks that are doing well with really strong fundamentals. Exactly
Speaker 3: what the returns will be only time will tell.
Speaker 1: This was like a Super Bowl moment for financial markets,
Speaker 1: and we learned that there are war rooms. You set
Speaker 1: up various ones and you increased your team. Can you
Speaker 1: just give us some color, where were you during all
Speaker 1: of this? What was the vibes like in these war
Speaker 1: rooms that you set up.
Speaker 3: It was a pretty amazing event in that it was
Speaker 3: one of the top five most active days for our
Speaker 3: clients in the fifty year plus history of the firm,
Speaker 3: And if you think about all the market events we've
Speaker 3: had over those fifty years, for the IPO to crack
Speaker 3: the top five is pretty unbelievable. We had one hundred
Speaker 3: and forty thousand clients call in live, We had lots
Speaker 3: of digital engagement. It was impressive to see, and our
Speaker 3: teams were fully staffed, ready and able to handle our clients'
Speaker 3: needs that day. It was wonderful to see the teamwork
Speaker 3: and the effort that went into making this a success
Speaker 3: on our side.
Speaker 1: How do you think this is going to establish, potentially
Speaker 1: what's next when it comes to other mega IPOs like
Speaker 1: Anthropic and Open Ai.
Speaker 3: Hopefully it establishes retail having a really strong presence at
Speaker 3: the table. I think it's wonderful for the retail investor
Speaker 3: to be able to participate in something like this, so
Speaker 3: I hope this IPO establishes that. I think it also
Speaker 3: establishes an incredible level of interest among our client base
Speaker 3: for new and innovative technologies and being able to participate them.
Speaker 3: We recently closed a deal with Forge which allows our
Speaker 3: clients to invest in pre IPO companies, So I think
Speaker 3: that the interest around these new ideas and emerging companies
Speaker 3: is quite high and will only continue.
Speaker 2: Charll Rick, the point that you just made is actually
Speaker 2: really important, given the fact that people know that increasingly
Speaker 2: the values being created before the IPO, when companies are
Speaker 2: still private. Do you think that some of these IPOs
Speaker 2: will expedite the efforts to get access to retail investors
Speaker 2: into private markets through a whole host of different ways.
Speaker 3: I do think it will expedite it because people will
Speaker 3: have interest in getting in earlier, because these companies are
Speaker 3: waiting far longer to go public, and so there's a
Speaker 3: lot of value being created while they're private and people
Speaker 3: want in. I know, on the Forge platform these companies
Speaker 3: were brought with much lower valuation. SpaceX in particular, I
Speaker 3: think first came to the Forge platform when it was
Speaker 3: roughly sixty billion in value, and so those investors who
Speaker 3: are able to participate early at a sixty billion dollar
Speaker 3: valuation are seeing it now well over two trillion dollars
Speaker 3: and are enjoying the very significant returns that they had.
Speaker 3: And I think more and more people are getting to
Speaker 3: see and experience these companies that are private. They're benefiting
Speaker 3: from a lot of their technology, and they want a
Speaker 3: way to access the returns that are going to come
Speaker 3: from the innovation that they're driving. So I do think
Speaker 3: it'll create more interest in private companies and we want
Speaker 3: to participate in that.
Speaker 2: What's the demographic of some of the retail investors who
Speaker 2: have been most interested in some of these IPOs? And
Speaker 2: I asked that because it seems like there are some
Speaker 2: generational divides that have emerged in terms of who is
Speaker 2: more actively trading some of the zero dated options and
Speaker 2: other instruments versus the sixty forty crowd that grew up
Speaker 2: in another era. Ye.
Speaker 3: Interesting, we saw demand for this IPO across the demographic,
Speaker 3: from young investors to our older investors, so really high
Speaker 3: demand across the board.
Speaker 1: Are you seeing your retail investors having to move money
Speaker 1: out of certain positions they can get ahead of something
Speaker 1: exciting like the spacexipo.
Speaker 3: A couple things we saw in May more new money
Speaker 3: being put to work, so people taking money from cash
Speaker 3: getting it invested. We also did see some rotation and
Speaker 3: part of what drove the high levels of activity around
Speaker 3: the SpaceX ipo were clients who are repositioning their portfolio
Speaker 3: to free up money to invest in SpaceX. I think
Speaker 3: it's a little bit a combination of both.
Speaker 1: When you look at some of the other brokerages that
Speaker 1: are involved, Fidelity, Robinhood e Trade. Why do you think
Speaker 1: investors should come to you? I know a lot of
Speaker 1: young investors are very excited about Robinhood and also how
Speaker 1: some of their software operates. Why for you, given the
Speaker 1: fact that this is going to be a massive summer
Speaker 1: for IPOs.
Speaker 3: Yeah, I think Schwab is the place to be because
Speaker 3: we've got what we think is the world's greatest trading
Speaker 3: platform and think or Swim. We've got a research and
Speaker 3: education platform that is built with the client first, putting
Speaker 3: information and analysis in their hands to make informed decisions.
Speaker 3: And we have the support and service that can't be matched.
Speaker 3: You know, we had one to one hundred and forty
Speaker 3: thousand client calls, all from tell me what an IPO
Speaker 3: is to how do I actually purchase the IPO and
Speaker 3: how do I get involved? So I think at Schwab
Speaker 3: you get full end to end service from a person
Speaker 3: that can help you with great digital experience, a leading
Speaker 3: trading platform, and the research and insights that are going
Speaker 3: to what your interests at the forefront. So that's why
Speaker 3: if you look at our trading activity, we handle the
Speaker 3: most daily average trades I think by double the next
Speaker 3: largest broker. So we do think we are the premier
Speaker 3: destination for trading in our country.
Speaker 2: Just real quick, real quick, Rick, I'm wondering if the
Speaker 2: FED is more hawkish and does raise rates, do you
Speaker 2: think that that's going to limit some of the profitability
Speaker 2: due to the contracting yield curve.
Speaker 3: For the company or for the company, we're well positioned
Speaker 3: and then if rates rise, that's generally beneficial to our company.
Speaker 3: But we're an all weather business model, and we've got
Speaker 3: three major sources of revenue trading activity, asset management and
Speaker 3: fee based revenue, and then revenue that comes from net
Speaker 3: interest margin. So we have a diversified business model can handle.
Speaker 3: We think a lot of different environments, but in general,
Speaker 3: with the environment that we're seeing around rates, that only
Speaker 3: provides a tailwind for our business.