Charles Schwab (NYSE:SCHW), the eponymous brokerage, has acquired private markets platform Forge (NYSE:FRGE) for $660 million.
Once again, bespoke Fintech investment bank FT Partners served as financial advisor on the deal for Forge. FT Partners has been a long time partner with Forge, assisting in its listing on the NYSE via a SPAC deal.
FT Partners also served as financial advisor to Forge CEO Kelly Rodriques and his prior company PENSCO which was sold for over $100 million in 2016.
The deal follows the recent acquisition of private marketplace EquityZen by Morgan Stanley.
While public markets have been on the decline for decades due to overly aggressive, and costly, regulation, private markets have boomed as big money has learned to jump ahead of the queue and capture much of the capital gain. Private marketplaces like Forge enable smaller investors to participate in the private securities market.
The all cash deal saw shares purchased at $45 or 6X Forge’s all time low. Yesterday, shares of Forge closed at around $26. Today, Forge shares have jumped to reflect Schwab’s purchase price – jumping more than 100%.
Schwab will now be able to incorporate Forge’s private market’s offering into its brokerage. This should help satisfy the growing demand for private securities. Schwab reports 38 million active accounts, 5.6 million work plan participants and 2.2 million banking accounts. In total, Schwab holds almost $12 trillion in assets.
In the announcement of the acquisition, Rodriques said the combination “will transform how the private market works.”
“With Schwab’s reach and Forge’s solutions, private companies will gain access to liquidity and new growth options from an expanded market of qualified retail investors, while investors will gain new ways to invest in the innovation economy. Together, we’re making the private markets work better for everyone.”
The Trump administration has sought to expand access to private markets beyond affluent, accredited investors. There is legislation in the works to fix the definition of an accredited investor and its discriminatory wealth metric. Additionally, the administration is working to incorporate alternative assets, including private securities, into 401k holdings. Both moves bode well for private market operators.