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Indiana University Announcer
Indiana University strengthens tomorrow's workforce with practical real world experience. IU grads make a difference in your community, serving as teachers, nurses and engineers who rise to tomorrow's challenges and meet them. Learn more@iu.edu impact,
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Bloomberg Audio Studios Announcer
Bloomberg audio studios podcasts,
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Bloomberg Host
radio news SpaceX seeing historic appetite from retail investors drawing over $370 million in demand. Charles Schwab was one of the firms that bought that brought the listing to Main Street. Joining us now, I'm so pleased to say, is the Schwab president and Chief Executive Officer, Rick Worster. Rick, great to see you. Thank you for being with us. I want to start just with how you see the retail investors role in this particular IPO and how it highlights in some ways a changed market.
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Rick Worster
Well, as a breakthrough event, I think for the retail investor who has allocated roughly 20% of the deal, which is triple A typical IPO. So it's great to see retail having a meaningful seat at the table. It created tremendous engagement with our clients and broadly with retail clients. Demand was off the charts and that demand continues. We've seen in the three days following the IPO nearly $7 billion of additional orders come from our clients alone. So lots of interest. A great breakthrough for the retail client. Having a seat at the table is great to see.
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Bloomberg Host
There's a little bit of concern in some corners, albeit with skepticism, because you never want to bet against an entire crowd of people who are going in one direction. But Rick, there does seem like it's more kind of in vibes and support of the ideas of things rather than traditional valuations. Does that concern you or does that frankly give you faith in the crowds, the wisdom of crowds, rather than Wall street analysis?
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Rick Worster
It's tough to know with foresight what the returns will be. But I think what's so exciting about the market is the level innovation that you're seeing and the retail investor sees that every day in their life and they want to be a part of it. And so you're seeing tremendous interest in AI related names in the space. Names. I think it comes from the retail investor being able to touch and feel the level of innovation in our, in our economy. And I think clearly they're holding names that are doing stocks that are doing well with really strong fundamentals. Exactly what the returns will be, only time will tell.
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Bloomberg Interviewer
This was like a Super bowl moment for financial markets and we learned that there are war rooms. He set up various ones and you increased your team. Can you just give us some color? Where were you during all of this? What was the vibes like in these war rooms that you set up, it
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Rick Worster
was pretty amazing event in that it was one of the top five most active days for our clients in the 50 year plus history of the firm. And if you think about all the market events we've had over those 50 years, for the IPO to crack the top five is pretty unreal. Unbelievable. We had 140,000 clients call in live, we had lots of digital engagement. It was impressive to see and our teams were fully staffed, ready and able to handle our clients needs that day. It was wonderful to see the teamwork and the effort that went into making this a success on our side.
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Bloomberg Interviewer
How do you think this is going to establish potentially what's next when it comes to other mega IPOs like Anthropic and OpenAI?
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Rick Worster
Hopefully it establishes retail having a really strong presence at the table. I think it's wonderful the for the retail investor to be able to participate in something like this. So I hope this IPO establishes that. I think it also establishes an incredible level of interest among our client base for new and innovative technologies and being able to participate them. We recently closed a deal with Forge which allows our clients to invest in pre IPO companies. And so I think that the, the interest around these new ideas and emerging companies is quite high and will only continue.
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Bloomberg Host
Charles Rick, the point that you just made is actually really important given the fact that people note that increasingly the value is being created before the IPO when companies are still private. Do you think that some of these IPOs will expedite the efforts to get access to retail investors into private markets through a whole host of different ways?
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Rick Worster
I do think it will expedite it because people will have interest in getting in earlier because these companies are waiting far longer to go public. And so there's a lot of value being created while they're private and people want it. I know on the Forge platform these companies were brought with much lower valuation. Space X in particular, I think first came to the Forge platform when it was roughly 60 billion in value. And so those investors who were able to participate early at a $60 billion valuation are seeing it now well over $2 trillion and are ENJ the very significant returns that they had. And I think more and more people are getting to see and experience these companies that are private. They're benefiting from a lot of their technology and they want a way to access the returns that are going to come from the innovation that they're driving. So I do think it will create more interest in private Companies and, and we want to participate in that.
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Bloomberg Host
What's the demographic of some of the retail investors who have been most interested in some of these IPOs. And I ask that because it seems like there are some generational divides that have emerged in terms of who is more activ trading some of the zero date dated options and other instruments versus the 6040 crowd that grew up in another era.
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Rick Worster
Yeah, interesting. We saw, we saw demand for this IPO across the demographic from young investors to our, to our older investors. So really high demand across the board.
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Bloomberg Interviewer
Are you seeing your retail investors having to move money out of certain positions so they can get ahead of something exciting like the Space X ipo?
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Rick Worster
A couple of things we saw in May, more new money being put to work. So people taking money from cash getting, getting it invested. We also did see some rotation and part of what drove the high levels of activity around the Space X IPO were clients who are repositioning their portfolio to free up money to, to invest in Space X. So I think it's a little bit combination of both.
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Bloomberg Interviewer
When you look at some of the other brokerage that are involved. Fidelity, Robinhood, E Trade. Why do you think investors should come to you? I know a lot of young investors are very excited about Robinhood and also how some of their software operates. Why for you? Given the fact that this is going to be a massive summer for IPOs.
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Rick Worster
Yeah. I think Schwab is the place to be because we've got what we think is the world's greatest trading platform and thinkorswim. We've got a research and education platform that is built with a client first putting information and analysis in their hands to make informed decisions. And we have the support and service that can't be matched. You know we had 100, took 140,000 client calls all from a tell me what an IPO is to how do I actually purchase the IPO and how do I get involved? So I think at Schwab you get full end to end service from a person that can help you a great digital experience, a leading trading platform and the research and insights that are going to put your interests at the forefront. So that's why if you look at our trading activity we handle the most daily average trades I think by double the next largest broker. So we do think we are the premier destination for trading in our, in our country.
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Bloomberg Host
Just real question real quick Rick. I'm wondering if the Fed is more hawkish and does raise rates, do you think that that's going to limit some of the profitability due to the contracting
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Rick Worster
yield curve for the company or for the company? For the for the company we're well positioned and if rates rise that's generally beneficial to our company but we're an all weather business model and we've got three major sources of revenue trading activity asset management and fee based revenue and then revenue that comes from net interest margin so we have a diversified business model can handle we think a lot of different environments but in general with the environment that we're seeing around rates that only provides a tailwind for our
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