Schwab Files for 7-Million Share Public Offering

Moving quickly to take advantage of the raging bull market, Charles R. Schwab filed a registration statement with the Securities & Exchange Commission proposing to sell shares in his discount brokerage firm to the public.

Under the proposed transaction, which was unveiled less than four months after a group led by Schwab repurchased the company he had founded from beleaguered BankAmerica, Charles Schwab Corp. will sell 7 million shares to the public at $14 to $17 a share.

Most of the proceeds will be used to repay debt the company incurred in the leveraged buyout, although $23 million will be added to working capital.

The shares to be sold represent a 28.7% stake in the company. Assuming a price of $17 a share, the deal places a $414.6 million valuation on the firm. Schwab himself will own 29.6% of the company and his stake will have a market value of $122.7 million.

The registration statement disclosed that the 49-year-old Schwab and his partners bought their shares in the company in March at the equivalent of $1.20 a share. Thus, they will make an enormous paper profit when the company goes public.

The filing disclosed that the company’s revenue and earnings jumped during the first half of 1987. Assuming that the capital structure contemplated by the transaction had been in place, net income would have climbed to $26.8 million from $10.8 million in the first six months of 1986.

The registration statement disclosed that the company had granted the right to purchase 2.1 million shares at $1.42 a share to Schwab and others who lost money when the BankAmerica stock they received in 1983 at the time of the brokerage’s purchase by the bank declined in value.

Schwab was reimbursed $252,000 for expenses in connection with buying back the company. He also received $375,000 in salary, a $750,000 bonus and $2.2 million from the termination of an incentive plan last year.