First Wit dumped its attempt to build a retail platform. Next, it dumped its name, and moved out of its Silicon Alley headquarters in New York to Connecticut. Then last year Charles Schwab Capital Markets bought it. At least Wit, by then Soundview, the name of the boutique it bought in 1999, was joining a like-minded firm with ambitions to change how markets work.
But Schwab has not had any more luck. Former CEO David Pottruck, ousted last year after three years of underperformance, had been determined to make Schwab bigger in institutional equities. But Epoch Partners, an investment bank he set up with TD Waterhouse, Ameritrade and three venture capital firms, closed down only 19 months after opening.
Last December's acquisition of Soundview for $340 million was his latest attempt to build an institutional business and one his successor, Charles Schwab, wasted no time in overturning. So now what's left of Soundview belongs to UBS which paid $265 million for the parts of Schwab Soundview Capital Markets that it wanted.
And that wasn't much. UBS has no need for more research, whether the technology coverage Soundview was known for, or the financial-political analysis from the Schwab Washington Research Group. Schwab wants out of institutional research, so if he can't sell that part he'll just close it down.
What UBS gets is trading technology and Schwab's Nasdaq trading business, which covers more than 12,000 stocks. UBS also has an exclusive agreement to take Schwab's order flow for eight years. Assuming it can please the regulators about best execution, UBS has a great deal. That's also assuming it doesn't step on the toes of Goldman Sachs, which has exclusive rights to distribute new equity offerings to Schwab, an agreement struck in 2001 when it bought the remnants of Epoch.
Schwab is not out of the woods. The firm, which for a few weeks in 1999 had a bigger market cap than Merrill Lynch, seems to please no-one.
Mark Constant, brokerage analyst for Lehman Brothers, says it offers ?inferior revenue and earnings growth, quality, and returns on invested capital ? at an unjustifiable premium to its peers?.