Schwab Denies Takeover Rumors as Stock Surges
Shares of Charles Schwab Corp. rocketed Thursday as much as 15% on speculation that it could be taken over by a London bank, but the giant discount brokerage quickly moved to douse the speculation.
“We have no interest in selling the company,” Chairman and Chief Executive Charles R. Schwab said in a statement after trading in the shares was halted by the New York Stock Exchange.
Volume in Schwab’s shares and equity options -- which allow traders to make leveraged bets on near-term stock price moves -- began their surge Wednesday amid rumors that British banking behemoth HSBC Holdings was pursuing the San Francisco-based brokerage.
Thursday morning, Schwab’s stock zoomed as high as $13.80 on massive volume, but it cooled off when trading resumed and closed with a gain of 70 cents, or 6%, to $12.68, its highest level in more than a year.
HSBC did not return calls for comment.
Schwab spokesman Greg Gable would not elaborate on the statement from his boss.
Speculation of new consolidation in the online brokerage industry has swirled since Ameritrade Holding Corp. struck a $2.9-billion deal last month to buy rival TD Waterhouse.
Schwab is the leading online brokerage in terms of assets. The industry has been reeling from lower trading volume in the wake of the dot-com bust.
Schwab, once known as a low-cost leader in the brokerage business, has tried to broaden its reach in recent years by focusing on its wealth-management services for rich clients.
Talk of an HSBC-Schwab combination has gained traction in recent days, said analyst Lauren Bender of research firm Celent in Boston.
“It’s the predominant rumor,” she said, “but both companies are pretty closed-mouthed.”
Bender said such a deal would make sense for HSBC, which has U.S. presences in banking, mortgages and credit cards but not in stock trading. If the bank were to offer a juicy premium to Schwab’s share price, the brokerage’s board would be obligated to consider the bid, solicited or not.
Charles R. Schwab himself, the firm’s 67-year-old founder, owns about 18% of the company’s stock, so his voice would hold plenty of clout in any takeover tussle.
The firm, with 7 million customers and more than $1 trillion in client assets, would be coveted as an upscale brand among discount brokers, Bender said, although its stock already trades at a premium to its peers based on fundamentals such as per-share earnings.
The HSBC talk “essentially is putting Schwab in play,” Bender said, meaning other banks might bid for it. Traders have speculated that Wells Fargo & Co. might be interested in Schwab to expand its retail presence.
Meanwhile, Schwab could try to make a purchase of its own.
Bender said the brokerage might consider buying rival E-Trade Financial Corp., whose overtures were spurned by Ameritrade this year. A bulkier Schwab would be harder for potential buyers to digest, she said.
