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SpaceX moving forward with an insider share sale that values it at about eight hundred billion dollars. Bloomberg News reported that in December, private markets, how much these companies are valued very much of interest to investors. We spoke about this with Rick Worster, the CEO of Charles Schwab yesterday. He weighed in on it. In that conversation with us, he discussed the acquisition of Forge Global, a marketplace for
buying and selling shares of private companies. Reminder, Schwab agreeded by Forge back in November for six hundred and sixty million dollars, and.
Our Forge acquisition was really about democratizing investments and alternatives. We're now going to be able to bring it to all of our investors in multiple different forms and allow them to participate in private markets the way institutions and the very wealthy have been able to. And we're thrilled to bridge that gap and excited for what that could mean for our client's wealth.
That was Charles SCHWAB'ZEO Rick Worcester, speaking yesterday with us here on Bloomberg BusinessWeek Daily Back with Us. Kelly Rodriquez, CEO of Forge Global. Kelly joins us from the World Economic Forum in Davas. Kelly, I want to get to Davos in just a second. But Rick's comment to you and to all of us about what Forage is going to bring to Charles Schwab, he's been talking about the acquisition. How do you see yourself, how do you see your company fitting into Schwab.
So, it's a really interesting time in the market. The private markets, which have historically been thought of as an alternative asset class, are really going mainstream now. This is a year and the performance bears this out if you've seen some of the recent data we've put out. But I think Schwab and others are coming to the conclusion that America's investors need to participate in this asset class. And it's a really exciting time because they want to
provide access. That was our mission nine years ago when we started, so they've been watching us for a while. This is a really exciting development for investors and for Schwab.
Hey, my understanding is I guess that deal right?
We did.
We actually were at Schwab Impact on the day it was announced and we talked with Rick about it. Then it is expected to close in the first half of twenty twenty six. Are you guys still on track for that as much as you know? Yes, yes, okay, absolutely, Hey, you know it is interesting too, And Tim and I talk about this all the time in terms of private markets, how much investors are certainly interested in that and that's
where they want exposure. I am curious about what are the conversations you're having on the ground in Davos when it comes to private markets, private interest.
Give us your take, So if you're talking to the capital markets or investing crowd, this is a theme that is a global theme. Our biggest growth this last year came from our European and UK offices. But the other big theme that's here in Davos is AI. AI is everywhere. You cannot believe. It's in every conversation and if you walk down the main strip in Davos, AI is the theme of the conference for sure. And nineteen of the largest AI companies are tracked by Forge because they're still private.
So the conversations are NonStop about the convergence of both the AI sector.
Are any non AI companies getting any love right now?
Oh yeah? The number two sector is defense and aerospace, and it was up one hundred and forty percent this year. Is that just space that's oh no, that's SpaceX, that's Andrail, that's Adventurer, there's there's a there's a whole bunch of them in there, and they're really interesting to the global audience too, do you know? Do do? Okay?
So I want to remind everybody what you do. You you you basically take you allow people who own equi in private companies to sell, to find buyers who are credited investors to then buy the shares. So like, if you're an early employee at Andrail, for example, and you have equity and you want to buy a house, maybe you want to get some liquidity, you can go to Forge Global and you're going to prepare them with a buyer.
Correct. Yeah, that's one use case.
Okay, So are you having because the growth of these companies has been so quick, are you having trouble finding people who want to part ways with their shares because they're like, hey, this is a rocket ship and I want to hold on for as long as possible.
Yeah, depending on what company you're talking about, there is a supply and demand dynamic that's always at play for the most popular, high performing sectors, and that's AI, defense and narrow space and fintech is up over one hundred percent this year. Those companies are sought after, and you do have supply and demand in balances. That's not true across the entirety of the six hundred names or so that trade on Forge, but in the hot ones, yes, there's a lot more demand than there is supply.
What about what kind of activity are you seeing around SpaceX specifically?
I mean SpaceX and the big AI names are the top names that trade at Forge. They're in the top ten and they have been. I mean SpaceX has been a sought after company for the last five years, but it's really been the last two years. Their broad base of investors have really poured into it. You know.
I think what's fascinating, Kelly, and this again goes back to something we've been talking about for the last two, three four cone years and you see it at Milken just the rise of private markets, private credit and the ability of all this money that's out there that allows something like an open AI to stay private longer, or you know SpaceX or you know, pick your name. Do you see that can continuing or tell me how you figure out whether that continues.
The more participation there is in this market, the more capital there is. And so at Forge we see these two dynamics. One is liquidity. People want to sell their stock. If a company's been private for seventeen or eighteen years and you'll work there for eight or ten, or even if you were an early investor, you have a fund that's got a tenured life for a duration, you need to start providing liquidity so you can raise your next capital raise. So there's a liquidity component to the market,
and then there's a capital raise. Open AI raised forty billion dollars privately this year. Think about that within the context of the IPO window and ask yourself this question. If AI companies can raise that much money privately, why are they going public? SpaceX has managed to raise billions over the duration of their life, and so you're going to continue to see this As Schwab brings forty two million investors into this market and twelve trillion dollars that
capital is not just going to buy someone shares. That capital will eventually find its way on balance sheets, so that's what you're going to see.
So you're saying it increases, it changes the supply and demand dynamic in your view absolutely.
Because you're not relying just on selling shareholders.
The Schwab investors that will have access to this do they have to be accredited investors like I have to have the rules like that accredit investors have.
So here's the interesting answer to that question. If you're buying on platform directly into a company or into a fund structure today in a single name, you have to
be accredited. However, in the next few weeks we are launching and this will obviously be part of Schwab, the first non accredited index fund that's got sixty of the biggest private companies in AI fintech, all the sectors at twenty five hundred dollars minimums for non accredited investors, so you can get a slice of the hottest names in the world through the Forged Megacorn Fund, which has been in existence for accrediteds and for qps for a few years,
but now we're making it available as a publicly listed fund that will be available in twenty twenty six.
And any rules in terms of moving in and out of it or how liquid will that be.
It's going to probably have a quarterly liquidation option, isn't It is an interval fund, so you'll be able to get in and out of it quarterly, but it will be available to everybody, every investor in the country.
What allowed you to make that shift? Is it a regulatory change that allowed.
That The regulatory environment allows for interval fund structures. But to actually pull it off, we acquired a really interesting company this last year called Liquidity, whose mission was to build publicly available funds that hold privates and they were able to structure the fund in such a way using Forge's data to get through the regulatory requirements to make this a publicly listed fund. Now you have to have access. So for this fund to be successful, we've got to
have access to a lot of supply. And that's what I was answering earlier, Tim to your question about is it just selling shareholders? It will be some combination of selling shareholders as well as balance sheet capital.
Kelly, great, great conversation, Thanks for staying up a little later over there in Davos and spending some time with us. We're going to have to get you back on in a little bit. That's Kelly Rodriquez, CEO of Forge Global, soon to be part of the Charles Schwab Corporation.