Schwab Further Strengthens Its Active Trader Offering With Acquisition of CyBerCorp and New Commission Discounts
(PR Newswire, Feb 2, 2000 08:14 hrs)
Acquisition Expands the Range of Services for Very Active Investors
Online Equity Commissions to Drop for Schwab Customers Trading More Than 30 Times a Quarter
SAN FRANCISCO, Feb. 2 /PRNewswire/ -- The Charles Schwab Corporation today announced a definitive agreement to acquire CyBerCorp, Inc., a closely held electronic trading technology and brokerage firm in Austin, TX providing Internet-based services to highly active, online investors. The acquisition is a tax-free stock-for-stock transaction to be accounted for as a purchase. The deal is expected to close in the first quarter of 2000.
Under the terms of the agreement, approximately 13.7 million unregistered shares of Schwab common stock will be exchanged for all outstanding shares, options and equity rights of CyBerCorp. Schwab has agreed to register the shares with the Securities and Exchange Commission after the closing. The acquisition has been approved by both companies' directors and is subject to various closing conditions. Agreements to vote in favor of the acquisition have been entered into by holders of over 90% of CyBerCorp's common stock. Based on the closing price of Schwab's stock on February 1, the total value of the transaction is approximately $488 million.
Also today, Schwab announced new commission reductions for its most active retail customers, cutting online equity commissions for eligible customers from $29.95 to as low as $14.95 for customers when they surpass 60 qualifying trades in a quarter.
"For the entire 26-year history of our company, we've been a leader in serving the needs of actively trading investors, offering a combination of high-touch service, leading technology and competitive pricing," said Chairman and Co-CEO Charles R. Schwab. "Our commitment to that winning combination continues today in our plans to join with CyBerCorp, a pioneer in trading technology, and in our new pricing, which further enhances our competitive position with more active investors."
CyBerCorp Acquisition
Founded in 1995 in Austin, CyBerCorp provides electronic trading technology and online brokerage services to highly active, full-time investors. It is a leading designer and developer of electronic intelligent order routing software that gives its customers the ability to scan ECNs, market makers and market specialists for the best prices available, based on the firm's proprietary routing logic, and then to forward orders to the optimal counter-party. CyBerCorp also provides its customers with institutional-style streaming quotes and news, Nasdaq level II data and stock screening and trade management tools.
"This is cutting edge technology that has proven immensely popular with highly active investors," said David S. Pottruck, President and Co-CEO of Schwab. "It is a trading cockpit for full-time investors who want to view and participate in the market like an institutional trader. By joining with CyBerCorp, we can harness valuable features of this technology for the benefit of Schwab's active retail investors as well as extend its reach to our investment advisor clients and other institutional players."
CyBerCorp's Founder Philip R. Berber will continue with the firm as Chairman, as will Greg Ferris, CyBerCorp's President and Chief Operating Officer. Schwab's Jim Hackley, Executive Vice President-Retail Client Services and an experienced leader of new business initiatives in his 16 years at Schwab, will be appointed Chief Executive Officer of the subsidiary. CyBerCorp will maintain its brand and its headquarters in Austin, where it has 140 employees, and will become a unit of Schwab's Capital Markets & Trading division, overseen by Lon Gorman, Vice Chairman and President, Schwab Capital Markets & Trading Group.
CyBerCorp today is dedicated to the full-time, experienced and highly active investor who is well-equipped in computer technology and high-speed Internet connectivity. The company ended 1999 with nearly 2,500 customer accounts and approximately $202 million in customer assets. Customer accounts grew by nearly tenfold from the end of 1998, while customer assets increased by more than tenfold in the same period.
CyBerCorp's customers generated 19,000 daily average revenue trades in December. In last year's third quarter, CyBerCorp's trading volumes advanced it into the ranks of the Top 10 online brokers as reported by Hambrecht & Quist and US Bancorp Piper Jaffray. The company's revenues totaled approximately $25 million in 1999, up almost 350% percent over 1998, and its after-tax profit margin in 1999 exceeded 16%.
"Joining forces with Schwab provides us with an unparalleled opportunity to continue CyBerCorp's innovation and growth," Mr. Berber commented. "We look forward to leveraging Schwab's knowledge and resources to further evolve our service for wider use by individual investors, investment advisors and other institutional clients and expect Schwab's global presence will be important as we eye overseas markets. We're also extremely pleased with the cultural fit between CyBerCorp and Schwab, without which we would not have pursued this alliance."
Mr. Pottruck said the sophistication of CyBerCorp's technology is important to Schwab as it continues to fulfill a longstanding commitment to innovation for customers.
"We remain committed to market making -- with its automatic execution capabilities, limit order protection and the liquidity it provides -- as an important vehicle for executing customer orders," Mr. Pottruck said. "At the same time, it's essential that we continue to be at the forefront as the Internet and new technologies break down the barriers between investors and the financial markets, and as new trading technologies migrate from the institutional and active trader markets to the wider community of retail investors."
"We have great respect for the entrepreneurial spirit and technological expertise that Philip and his team bring to this field," Mr. Pottruck continued. "We intend to preserve that spirit while leveraging their services and technology to serve a wider array of active traders and to benefit our customer base going forward, including our existing actively trading customers who are using CyBerCorp or other firms like it for a portion of their portfolio."
New Pricing
Under the new pricing, effective February 1, commissions for online equity trades drop from $29.95 to $19.95 when customers exceed 30 qualifying trades per quarter and down to $14.95 when they surpass 60 qualifying trades in a quarter. Customers must have $50,000 in household assets at Schwab to qualify for the new pricing. (For details, see Appendix A.)
"Our customers continually tell us not only in words but in their use of our services that the value of their relationship with Schwab goes beyond just price to the unique combination of service and advice we deliver in person and through our award-winning Web site. In fact, our most actively trading customers use all of our channels quite regularly," said Linnet Deily, Vice Chairman and President, Schwab Retail Group. "At the same time, the competitive realities of the market require us to pay close attention to our pricing and adjust it appropriately as we continue to enhance the technology and services we offer."
The price breaks for active, high-volume investors round out a rich service offering that includes Signature Services and Velocity(TM), Schwab's own desktop system for actively trading investors. Velocity is now available for both PC and Macintosh users. "The acquisition of CyBerCorp accelerates our ability to enhance the technology we deliver to our most active customers," Ms. Deily added. "Combined with our new pricing, it is definitive proof of our commitment to our customers' trading needs."
Schwab will also be implementing increases to account maintenance minimums and fees for certain of its retail accounts, effective April 1. Accounts managed by investment advisors through Schwab Institutional continue to be priced separately.
Appendix A: New Pricing Schedule
Up to 1,000 shares Price per share over 1,000 shares $29.95 for first 30 trades/quarter 3 cents $19.95 for 31st to 60th trades/quarter 2 cents $14.95 for 61st trade and above/quarter 1 cent per share or $14.95,whichever is greater Pricing Offer:
-- Eligible customers will automatically receive new pricing.
-- Applies to all eligible customers who execute a qualifying number of commissionable equity and option trades at Schwab in a calendar quarter.
-- The discounted commission price is in effect at the time the trade is executed and will be reflected in confirm and statements. However, the discounted commission price may not be reflected in estimated commissions on schwab.com and Velocity.
Assets/Accounts:
-- Customers must have a total of at least $50,000 in assets in their combined eligible Schwab accounts. Eligible accounts are all accounts that contain the same last name and same address of the customer.
-- Accounts managed by an enrolled Investment Manager with Schwab Institutional do not qualify for this offer.
Qualifying Trades:
-- Each customer account must meet the trade threshold independently with 30 or 60 qualifying trades per quarter to qualify for discounted commissions at each threshold. (See below for more details on discounted trades.)
-- All equity and option trades that are charged commissions and are executed through any channel (e.g., the branch, phone representatives,Telebroker, Schwab.com or Velocity) in the calendar quarter qualify to meet the 30 and 60 trade thresholds. No mutual fund trades, bond trades, treasury trades and any type of zero commission trades qualify to meet the pricing thresholds nor will they receive pricing discounts through this offer.
Discounted Trades:
-- Only equity trades (no option trades) placed through Schwab.com or Velocity will receive discounted pricing. No penny stock trades or equity trades resulting from option exercises or assignments will be discounted.
-- Trades receiving this discount must be executed during the same calendar quarter as the qualifying trades. Trade counters are reset to zero at the beginning of each calendar quarter (January 1, April 1,July 1 and October 1).
-- Commission discounts are not retroactive and will only apply to trades placed after the launch of this offer on February 1, 2000. |
