Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. You're listening to Bloomberg
Speaker 1: BusinessWeek with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 2: SpaceX moving forward with an insider share sale that values
Speaker 2: it at about eight hundred billion dollars. Bloomberg News reported
Speaker 2: that in December, private markets, how much these companies are
Speaker 2: valued very much of interest to investors. We spoke about
Speaker 2: this with Rick Worster, the CEO of Charles Schwab yesterday.
Speaker 2: He weighed in on it. In that conversation with us,
Speaker 2: he discussed the acquisition of Forge Global, a marketplace for
Speaker 2: buying and selling shares of private companies. Reminder, Schwab agreeded
Speaker 2: by Forge back in November for six hundred and sixty
Speaker 2: million dollars, and.
Speaker 3: Our Forge acquisition was really about democratizing investments and alternatives.
Speaker 3: We're now going to be able to bring it to
Speaker 3: all of our investors in multiple different forms and allow
Speaker 3: them to participate in private markets the way institutions and
Speaker 3: the very wealthy have been able to. And we're thrilled
Speaker 3: to bridge that gap and excited for what that could
Speaker 3: mean for our client's wealth.
Speaker 2: That was Charles SCHWAB'ZEO Rick Worcester, speaking yesterday with us
Speaker 2: here on Bloomberg BusinessWeek Daily Back with Us. Kelly Rodriquez,
Speaker 2: CEO of Forge Global. Kelly joins us from the World
Speaker 2: Economic Forum in Davas. Kelly, I want to get to
Speaker 2: Davos in just a second. But Rick's comment to you
Speaker 2: and to all of us about what Forage is going
Speaker 2: to bring to Charles Schwab, he's been talking about the acquisition.
Speaker 2: How do you see yourself, how do you see your
Speaker 2: company fitting into Schwab.
Speaker 1: So, it's a really interesting time in the market. The
Speaker 1: private markets, which have historically been thought of as an
Speaker 1: alternative asset class, are really going mainstream now. This is
Speaker 1: a year and the performance bears this out if you've
Speaker 1: seen some of the recent data we've put out. But
Speaker 1: I think Schwab and others are coming to the conclusion
Speaker 1: that America's investors need to participate in this asset class.
Speaker 1: And it's a really exciting time because they want to
Speaker 1: provide access. That was our mission nine years ago when
Speaker 1: we started, so they've been watching us for a while.
Speaker 1: This is a really exciting development for investors and for Schwab.
Speaker 4: Hey, my understanding is I guess that deal right?
Speaker 1: We did.
Speaker 4: We actually were at Schwab Impact on the day it
Speaker 4: was announced and we talked with Rick about it. Then
Speaker 4: it is expected to close in the first half of
Speaker 4: twenty twenty six. Are you guys still on track for
Speaker 4: that as much as you know? Yes, yes, okay, absolutely, Hey,
Speaker 4: you know it is interesting too, And Tim and I
Speaker 4: talk about this all the time in terms of private markets,
Speaker 4: how much investors are certainly interested in that and that's
Speaker 4: where they want exposure. I am curious about what are
Speaker 4: the conversations you're having on the ground in Davos when
Speaker 4: it comes to private markets, private interest.
Speaker 1: Give us your take, So if you're talking to the
Speaker 1: capital markets or investing crowd, this is a theme that
Speaker 1: is a global theme. Our biggest growth this last year
Speaker 1: came from our European and UK offices. But the other
Speaker 1: big theme that's here in Davos is AI. AI is everywhere.
Speaker 1: You cannot believe. It's in every conversation and if you
Speaker 1: walk down the main strip in Davos, AI is the
Speaker 1: theme of the conference for sure. And nineteen of the
Speaker 1: largest AI companies are tracked by Forge because they're still private.
Speaker 1: So the conversations are NonStop about the convergence of both
Speaker 1: the AI sector.
Speaker 2: Are any non AI companies getting any love right now?
Speaker 1: Oh yeah? The number two sector is defense and aerospace,
Speaker 1: and it was up one hundred and forty percent this year.
Speaker 1: Is that just space that's oh no, that's SpaceX, that's Andrail,
Speaker 1: that's Adventurer, there's there's a there's a whole bunch of
Speaker 1: them in there, and they're really interesting to the global
Speaker 1: audience too, do you know? Do do? Okay?
Speaker 2: So I want to remind everybody what you do. You
Speaker 2: you you basically take you allow people who own equi
Speaker 2: in private companies to sell, to find buyers who are
Speaker 2: credited investors to then buy the shares. So like, if
Speaker 2: you're an early employee at Andrail, for example, and you
Speaker 2: have equity and you want to buy a house, maybe
Speaker 2: you want to get some liquidity, you can go to
Speaker 2: Forge Global and you're going to prepare them with a buyer.
Speaker 1: Correct. Yeah, that's one use case.
Speaker 2: Okay, So are you having because the growth of these
Speaker 2: companies has been so quick, are you having trouble finding
Speaker 2: people who want to part ways with their shares because
Speaker 2: they're like, hey, this is a rocket ship and I
Speaker 2: want to hold on for as long as possible.
Speaker 1: Yeah, depending on what company you're talking about, there is
Speaker 1: a supply and demand dynamic that's always at play for
Speaker 1: the most popular, high performing sectors, and that's AI, defense
Speaker 1: and narrow space and fintech is up over one hundred
Speaker 1: percent this year. Those companies are sought after, and you
Speaker 1: do have supply and demand in balances. That's not true
Speaker 1: across the entirety of the six hundred names or so
Speaker 1: that trade on Forge, but in the hot ones, yes,
Speaker 1: there's a lot more demand than there is supply.
Speaker 4: What about what kind of activity are you seeing around
Speaker 4: SpaceX specifically?
Speaker 1: I mean SpaceX and the big AI names are the
Speaker 1: top names that trade at Forge. They're in the top
Speaker 1: ten and they have been. I mean SpaceX has been
Speaker 1: a sought after company for the last five years, but
Speaker 1: it's really been the last two years. Their broad base
Speaker 1: of investors have really poured into it. You know.
Speaker 4: I think what's fascinating, Kelly, and this again goes back
Speaker 4: to something we've been talking about for the last two,
Speaker 4: three four cone years and you see it at Milken
Speaker 4: just the rise of private markets, private credit and the
Speaker 4: ability of all this money that's out there that allows
Speaker 4: something like an open AI to stay private longer, or
Speaker 4: you know SpaceX or you know, pick your name. Do
Speaker 4: you see that can continuing or tell me how you
Speaker 4: figure out whether that continues.
Speaker 1: The more participation there is in this market, the more
Speaker 1: capital there is. And so at Forge we see these
Speaker 1: two dynamics. One is liquidity. People want to sell their stock.
Speaker 1: If a company's been private for seventeen or eighteen years
Speaker 1: and you'll work there for eight or ten, or even
Speaker 1: if you were an early investor, you have a fund
Speaker 1: that's got a tenured life for a duration, you need
Speaker 1: to start providing liquidity so you can raise your next
Speaker 1: capital raise. So there's a liquidity component to the market,
Speaker 1: and then there's a capital raise. Open AI raised forty
Speaker 1: billion dollars privately this year. Think about that within the
Speaker 1: context of the IPO window and ask yourself this question.
Speaker 1: If AI companies can raise that much money privately, why
Speaker 1: are they going public? SpaceX has managed to raise billions
Speaker 1: over the duration of their life, and so you're going
Speaker 1: to continue to see this As Schwab brings forty two
Speaker 1: million investors into this market and twelve trillion dollars that
Speaker 1: capital is not just going to buy someone shares. That
Speaker 1: capital will eventually find its way on balance sheets, so
Speaker 1: that's what you're going to see.
Speaker 2: So you're saying it increases, it changes the supply and
Speaker 2: demand dynamic in your view absolutely.
Speaker 1: Because you're not relying just on selling shareholders.
Speaker 2: The Schwab investors that will have access to this do
Speaker 2: they have to be accredited investors like I have to
Speaker 2: have the rules like that accredit investors have.
Speaker 1: So here's the interesting answer to that question. If you're
Speaker 1: buying on platform directly into a company or into a
Speaker 1: fund structure today in a single name, you have to
Speaker 1: be accredited. However, in the next few weeks we are
Speaker 1: launching and this will obviously be part of Schwab, the
Speaker 1: first non accredited index fund that's got sixty of the
Speaker 1: biggest private companies in AI fintech, all the sectors at
Speaker 1: twenty five hundred dollars minimums for non accredited investors, so
Speaker 1: you can get a slice of the hottest names in
Speaker 1: the world through the Forged Megacorn Fund, which has been
Speaker 1: in existence for accrediteds and for qps for a few years,
Speaker 1: but now we're making it available as a publicly listed
Speaker 1: fund that will be available in twenty twenty six.
Speaker 4: And any rules in terms of moving in and out
Speaker 4: of it or how liquid will that be.
Speaker 1: It's going to probably have a quarterly liquidation option, isn't
Speaker 1: It is an interval fund, so you'll be able to
Speaker 1: get in and out of it quarterly, but it will
Speaker 1: be available to everybody, every investor in the country.
Speaker 2: What allowed you to make that shift? Is it a
Speaker 2: regulatory change that allowed.
Speaker 1: That The regulatory environment allows for interval fund structures. But
Speaker 1: to actually pull it off, we acquired a really interesting
Speaker 1: company this last year called Liquidity, whose mission was to
Speaker 1: build publicly available funds that hold privates and they were
Speaker 1: able to structure the fund in such a way using
Speaker 1: Forge's data to get through the regulatory requirements to make
Speaker 1: this a publicly listed fund. Now you have to have access.
Speaker 1: So for this fund to be successful, we've got to
Speaker 1: have access to a lot of supply. And that's what
Speaker 1: I was answering earlier, Tim to your question about is
Speaker 1: it just selling shareholders? It will be some combination of
Speaker 1: selling shareholders as well as balance sheet capital.
Speaker 2: Kelly, great, great conversation, Thanks for staying up a little
Speaker 2: later over there in Davos and spending some time with us.
Speaker 2: We're going to have to get you back on in
Speaker 2: a little bit. That's Kelly Rodriquez, CEO of Forge Global,
Speaker 2: soon to be part of the Charles Schwab Corporation.