Social Finance Inc. is planning for takeovers after agreeing to go public in a merger with a blank-check company that values the upstart at around $8.7 billion.
“We want to invest heavily in acquisitions and new growth vehicles,” Chief Executive Officer Anthony Noto said Thursday in an interview.
The online lender known as SoFi, which gained popularity by refinancing student loans, agreed to merge with Social Capital Hedosophia Holdings Corp. V, a special purpose acquisition company founded by former Facebook executive Chamath Palihapitiya. It marks the latest example of a growing trend in which closely held firms go public by merging with a SPAC.
SoFi, which weathered a workplace sexual-harassment scandal that forced out its founder and first CEO, Mike Cagney, has long been viewed as a financial-technology company destined to go public. Its early years endeared it to some federal officials concerned that recent college graduates needed more options to refinance their expensive student loans.
SoFi then sought to capitalize on its customer base of young, highly paid white-collar professionals — the company calls them “members” — by offering them other financial products.
In a presentation to prospective investors Thursday, San Francisco-based SoFi and Palihapitiya’s firm compared the lender to Apple Inc., Tesla Inc. and Amazon.com Inc., claiming that SoFi is in a position to similarly disrupt established leaders in its industry. New products such as credit cards helped fuel a surge in SoFi customers to 1.5 million as of Sept. 30, up 74% from a year earlier.
“SoFi’s innovative, member-first platform has demystified financial services for millions of Americans,” Palihapitiya said in a statement. “Additionally, the acceleration of cross-buying by existing SoFi members has created a virtuous cycle of compounding growth, diversified revenue and high profitability.”
But recent growth has come at a cost to the bottom line. Net losses totaled $492 million in 2018 and 2019, filings show, and through the first nine months of last year they were 21% higher than the same period a year earlier. Net revenue climbed 4% during that time to $394 million.
In October, the company received preliminary approval from the Office of the Comptroller of the Currency for a national bank charter, a move that the company said, if finalized, would reduce its cost of funds.
SPACs raised a record $78 billion in the U.S. last year, according to data compiled by Bloomberg, as financiers and startup founders sought a quicker way to go public than the traditionally cumbersome process of initial public offerings.
The SoFi transaction is expected to provide as much as $2.4 billion in cash proceeds, which includes $1.2 billion through a private investment in public equity, or PIPE. Investors include funds managed by BlackRock Inc., T. Rowe Price Associates Inc., Coatue Management, and Healthcare of Ontario Pension Plan.
The recently enacted OBBBA makes lower tax rates "permanent," though other provisions could still make earlier Roth conversions appealing under the right conditions.
Americans with life insurance coverage are far more likely to feel assured of their loved ones' future, though myths and misconceptions still hold many back from getting coverage.
Mounting regulatory pressures and proposed taxes are putting a strain on higher education institutions, forcing renewed focus on liquidity management and the secondary market for private equity.
Poll of 1,500 retirement plan investors finds 45% interested in private equity and private debt, with more than three-quarters saying they'd ramp up contributions as a result.
Most firms place a limit on advisors’ sales of alternative investments to clients in the neighborhood of 10% a customer’s net worth.
Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.
Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.
