Why Charles Schwab Stock Was Shocked Thursday

Charles Schwab (SCHW -0.47%) saw its share price drop on Thursday due to events beyond the company’s control. That’s because the top news for the brokerage was that a majority shareholder unloaded some of its Schwab stock at a discount.

Schwab’s share price fell in sympathy. By the end of the trading session, the company’s shares had lost 0.5% of their value. This compares favorably, but only just, with S&P 500 index down 0.8% on the day.

Brokerage for sale, cheap

In the third quarter of the 2024 earnings report, based in Canada Toronto-Dominion Bank (T.D -2.19%) disclosed that it sold 40.5 million shares of Schwab common stock. It made about $2.5 billion from the sale, putting the average share price at $61.73. This is notably below the brokerage’s most recent closing price of $64.27 per share.

The move was part of an attempt to shore up the lender’s finances. For the quarter, it set aside a C$2.6 billion ($1.9 billion) provision to pay fines expected to be handed down by the US Department of Justice (DoJ). The agency is currently in the middle of an investigation into the bank’s anti-money laundering (AML) efforts.

The share sale reduces Toronto-Dominion’s stake in Schwab to just over 10 per cent. Before the divestment, this figure was 12.3%.

I am already not in favor of the market

Although extenuating circumstances were the driving force behind the Toronto-Dominion divestment, investors have generally been cool with Schwab lately. Earlier this summer, the company said it was slimming down its banking operations, and some market players weren’t too happy about that strategy. Meanwhile, its second-quarter earnings showed headline net income that barely shrank from the year-ago figure.