Charles Schwab Corporation Announces \$1.5 Billion Offering of 6.100% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series L

Key Points

• Offering Size: \$1.5 billion (1,500,000 depositary shares, each representing a 1/100th interest in a share of Series L Preferred Stock).
• Dividend Rate: 6.100% fixed-rate reset, non-cumulative, perpetual preferred stock.
• Trade Listing: Intention to list the depositary shares on the New York Stock Exchange (NYSE) within 30 days of initial delivery.
• Use of Proceeds: Proceeds to be applied as set forth under the “Use of Proceeds” in the Prospectus Supplement (not specified in the extracted document, but typically for general corporate purposes or to strengthen the company’s capital base).
• Underwriting Syndicate: Leading underwriters include Citigroup Global Markets Inc., Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, TD Securities (USA) LLC, and Wells Fargo Securities, LLC. Co-managers include Academy Securities, Barclays Capital Inc., PNC Capital Markets LLC, Truist Securities, Inc., and U.S. Bancorp Investments, Inc.
• No Over-allotment Option: There is no over-allotment (greenshoe) option for this issuance.
• Ratings: Expected ratings are intentionally omitted in the term sheet, suggesting either pending ratings or a strategic decision not to disclose.
• Legal Opinions: The company has obtained legal opinions and consent from Wachtell, Lipton, Rosen & Katz related to the issuance.
• Effective Date: The underwriting agreement was executed on April 20, 2026.

Details of the Offering

The Charles Schwab Corporation (“Schwab”) has successfully executed an underwriting agreement to issue \$1.5 billion of depositary shares, each representing a 1/100th interest in a newly created Series L Preferred Stock. This class of preferred shares is characterized by the following:

• Fixed-Rate Reset Dividend: The Series L Preferred Stock carries a 6.100% fixed-rate reset dividend, which is non-cumulative and perpetual in nature. This means that if dividends are not declared in a given period, they do not accumulate for future payment, and the shares have no maturity date.
• Perpetual Securities: These preferred shares are perpetual and may be redeemed at the company’s discretion under certain conditions, as outlined in the Certificate of Designations.
• NYSE Listing: Schwab will seek to list the depositary shares on the New York Stock Exchange within 30 days after the initial issuance, enhancing liquidity for investors.

Underwriting and Distribution

The distribution of the depositary shares is led by a strong syndicate of major investment banks. Citigroup, Goldman Sachs, J.P. Morgan, Morgan Stanley, TD Securities, and Wells Fargo are acting as joint book-running managers, while several other financial institutions are serving as co-managers. No over-allotment option is included, meaning the offering size is capped at \$1.5 billion.

The underwriting agreement contains customary representations, warranties, and indemnities between Schwab and the underwriters. Schwab has agreed to several covenants, including the timely filing of necessary SEC documents, maintaining internal controls, and using proceeds for purposes outlined in the prospectus.

Important Shareholder and Price-Sensitive Considerations

• Capital Structure Impact: The issuance of \$1.5 billion in new preferred equity will increase Schwab’s capital base and may affect key financial ratios, including leverage and regulatory capital ratios. Preferred stock takes priority over common equity in dividend payments and liquidation but does not typically dilute common shareholders’ voting rights.
• Dividend Commitment: The high 6.100% dividend rate may be attractive to income-focused investors but represents a significant ongoing cost to the company. Since the dividends are non-cumulative, missed payments do not accrue but may affect investor sentiment.
• Potential for Price Movement: The decision to issue a large amount of preferred stock could be interpreted as a move to strengthen capital reserves, fund growth, or meet regulatory requirements. Investors should consider whether this signals management’s view of future capital needs or market conditions.
• Market and Regulatory Risks: Any change in Schwab’s financial condition, credit ratings, or regulatory environment could impact the trading value of the preferred shares and potentially the common stock. The absence of disclosed ratings in the term sheet is notable, as ratings can materially affect investor demand and pricing.
• Legal Protections: Schwab has provided detailed indemnification agreements to protect underwriters from misstatements in offering documents, and its internal controls and disclosures are certified as compliant with Sarbanes-Oxley and SEC rules.
• No Material Adverse Change: The company certifies that there has been no material adverse change to its financial condition or business since the most recent audited financial statements, providing confidence to investors that the offering is not a distress move.

Summary Table: Key Terms of the Series L Preferred Stock Offering

Conclusion

The Charles Schwab Corporation’s \$1.5 billion issuance of Series L Preferred Stock represents a significant capital markets transaction that could influence both the company’s financial structure and its share price. Investors should closely monitor official communications regarding the use of proceeds, dividend policy, and any subsequent rating agency actions. The absence of an over-allotment (greenshoe) option means the offering size is fixed, and the high dividend rate underscores Schwab’s willingness to pay for additional capital flexibility.

Shareholders should consider the potential implications for earnings, capital adequacy, and future dividend policy on both common and preferred equity. As always, market conditions and management’s strategic rationale for the offering will be key to how the market interprets this move.

Disclaimer: This article is for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. Please consult your financial advisor before making investment decisions. The information is based on publicly available filings at the time of writing and may be subject to change.

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