MS sees that in acquiring Solium it is bringing in a deep, attractive pool of potential wealth management clients, notes Tim Shirata, EVP Guild Investment Management.
Morgan Stanley (MS) is acquiring a Canadian firm, Solium Capital, which manages stock-compensation plans for about 3,000 companies. Collectively, Solium’s clients have a million employees — disproportionately young, and disproportionately employed in high-tech, high-growth startup companies (including, for example, Nextdoor, Sonos (SONO), Dropbox (DBX), Stripe, and Instacart).
This acquisition makes sense for MS as the company begins to shift emphasis from volatile legacy businesses, such as securities trading towards more staid subscription-based businesses with predictable revenue streams.
However, more to the point, one of those “more staid businesses” is wealth management. MS clearly sees that in acquiring Solium at a 43% premium to that firm’s last traded price, it is bringing in a deep, attractive pool of potential wealth management clients, some of whom will become very wealthy indeed when their companies go public, and will be likely to retain the management services of the firm that managed their stock compensation plan.
This is one more data point suggesting to us where the money is. In an overarching sense, the population of growing companies is going to remain concentrated in productivity-enhancing, cost-saving technology industries, particularly cloud, software, and Artificial Intelligence (AI). This has been true for two decades, and it is going to remain true for the foreseeable future.
Investment implications:
The dominance of technology in the ranks of fast-growing U.S. companies — especially cloud, software, and A I— is unlikely to be challenged any time soon.
