Schwab (SCHW) Closes Deal to Acquire Certain Assets of Motif

·3-min read

Charles Schwab SCHW has acquired Motif’s technology and intellectual property assets. Financial details of the deal, which was announced in May, have not been disclosed yet.

Based in Sans Francisco-CA, Motif provides thematic investment strategies and allows investors to trade intelligently weighted baskets of stocks built around themes, investing styles or multi-asset models.

Per the deal, all of Motif’s technology and intellectual property including algorithms, patents and source code has been acquired by Schwab. Broker-dealer, RIA, client accounts and client assets were not part of the deal.

Moreover, Schwab has hired the majority of Motif’s development and investment talent. The founder of the acquired company, Hardeep Walia, also joined Schwab.

At the time of announcing the deal, Walia had said, “For over a decade, Motif’s unwavering mission has been to introduce investors to the power of thematic investing. By combining data science and automation, we have developed an innovative and personalized investing platform that appeals to both individuals and advisors.”

With this acquisition, Schwab aims to bolster existing capabilities, and speed up the development of thematic and direct indexing solutions for Schwab’s retail investors, as well as RIA clients.

Schwab on Acquisition Spree

In May, the company completed the acquisition of the assets of USAA’s Investment Management Company, including brokerage and managed portfolio accounts. Earlier in February, it inked a deal to acquire Naples, FL-based Wasmer, Schroeder & Company, LLC, with an aim of further strengthening its position in the brokerage industry.

Additionally, in November 2019, in a surprise move, Schwab inked a deal to acquire TD Ameritrade Holding AMTD for nearly $26 billion. The all-stock transaction, expected to close in the second half of 2020, has already received shareholder and anti-trust approvals.

Our Take

The online brokerage industry is undergoing massive operational upheavals. Last year, several leading players — with Schwab at the forefront — introduced commission-free trading with an aim of gaining further market share. In fact, these brokerage firms witnessed a significant rise in new accounts during the first quarter of 2020 as stock markets experienced heightened volatility amid coronavirus-induced mayhem.

Following such disruptions, consolidation was expected in the industry. In February 2020, major investment bank Morgan Stanley MS inked a deal to acquire E*Trade Financial ETFC. The move is in sync with Morgan Stanley’s efforts to diversify revenues.

Meanwhile, Schwab’s inorganic growth efforts — supported by a strong capital position — are expected to boost market share and enhance profitability over time. However, lower interest rates remain a major headwind.

Shares of this Zacks Rank #3 (Hold) company have lost 8.5% over the past year against the industry’s 0.6% growth. You can see the complete list of today’s Zacks #1 Rank stocks here.

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