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

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The Charles Schwab Corporation (SCHW - Free Report) entered an all-cash deal with Motif to acquire the latter’s technology and intellectual property. Financial details of the deal were not disclosed. Also, the transaction is expected to close by mid-2020.

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 will be acquired by Schwab. Notably, broker-dealer, RIA, client accounts and client assets are not included in the acquisition.

Also, Schwab will hire a majority of Motif’s development and investment talent. The founder of the acquired company will also join Schwab post deal completion.

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

"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," said Hardeep Walia, founder of Motif.

Past Announced Deals

Over the past year, Schwab has been undertaking several inorganic moves. In February 2020, it inked an all-cash deal to acquire Naples, FL-based Wasmer, Schroeder & Company, LLC.

Also, in July 2019, the company announced a plan to acquire certain assets of USAA’s Investment Management Company, including brokerage and managed portfolio accounts. The all-cash deal is valued at $1.8 billion.

Then in a surprise move, Schwab inked a deal to buy TD Ameritrade Holding (AMTD - Free Report) for nearly $26 billion in November 2019. The stock and cash transaction will create a behemoth in online brokerage space.

Our Take

Schwab’s inorganic growth efforts, with support from strong capital position, are expected to boost market share and enhance profitability over time. Also, the company’s intention of strengthening trading business by offering commission-free trading seems impressive. However, lower interest rates are expected to hurt its margins.

Shares of this Zacks Rank #3 (Hold) company have lost 18.6% over the past six months compared with the industry’s decline of 15.8%.



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