- The stock price of Social Capital Hedosophia Holdings VCorp (NYSE: IPOE) increased over 50% this past week as the stock price went from $12.30 as of January 4 morning to $18.67 (as of 12:09 PM today). This is why it happened.
The stock price of Social Capital Hedosophia Holdings VCorp (NYSE: IPOE) increased over 50% this past week as the stock price went from $12.30 as of January 4 morning to $18.67 (as of 12:09 PM today). One of the biggest reasons why the stock price increased is due to an announcement about SoFi going public via a merger with Social Capital Hedosophia Holdings Corp. V (NYSE: IPOE) — which is a publicly-traded special purpose acquisition company (SPAC). This will bring a major consumer-focused financial technology business to the public markets. And the transaction values SoFi at an equity value of $8.65 billion post-money.
SoFi is known as a member-centric one-stop-shop for financial services, including loan refinancing, mortgages, personal loans, credit cards, insurance, investing and deposit accounts — which has allowed more than 1.8 million members to borrow, save, spend, invest and protect their money since the company was founded. And SoFi’s full suite of financial products offers members the speed, selection, content, and convenience that only an integrated digital platform can provide and allows them to manage their financial lives in one application all on their phone.
SoFi’s consumer offering is also augmented by its ownership and independent operation of Galileo — one of the leading providers of critical technology infrastructure services, including customer-facing and back-end capabilities to fast-growing financial services providers. Currently, Galileo has approximately 50 million accounts on its platform.
And SoFi’s consumer and enterprise businesses are highly complementary, thus enabling SoFi to provide faster product innovation and speed of service to both SoFi members and the customers of Galileo’s clients. Plus SoFi has experienced rapid acceleration with this strategy and has achieved six consecutive quarters of year-over-year member growth.
SoFi has received preliminary conditional approval from the U.S. Office of the Comptroller of the Currency (OCC) for a national bank charter in October 2020. And if SoFi obtains final regulatory approval to own a bank, then it would have a lower cost of funds to further support SoFi’s growth.
In the third quarter of 2020, SoFi has delivered over $200 million in total net revenue and it is on track to generate approximately $1 billion of estimated adjusted net revenue in 2021, representing year-over-year growth of approximately 60 percent, and full-year adjusted EBITDA profitability. SoFi’s management team (led by CEO Anthony Noto) will continue to lead SoFi following the transaction.
The transaction is expected to deliver up to $2.4 billion of gross proceeds to the combined company, which includes the contribution of up to $805 million of cash held in SCH’s trust account from its initial public offering in October 2020. And the combination is further supported by a $1.2 billion PIPE at $10 per share led by Chamath Palihapitiya, Founder and CEO of SCH, and Hedosophia with commitments from funds and accounts managed by BlackRock, Altimeter Capital Management, Baron Capital Group, Coatue Management, Durable Capital Partners LP, and Healthcare of Ontario Pension Plan (HOOPP). And SoFi also received a previous anchor investment from funds and accounts advised by T. Rowe Price Associates.
Existing SoFi shareholders are going to roll 100% of their equity into the combined company. And concurrent with closing, $150 million of the transaction proceeds will be used for strategic secondary transactions that will help structure SoFi’s pro forma capitalization table in a way that is more conducive to obtaining an OCC national bank charter.
The deal — which has been unanimously approved by SCH’s board of directors and the independent directors of SoFi’s board of directors — is expected to close in the first quarter of 2021, and is subject to approval by SCH’s shareholders and other customary closing conditions, including any applicable regulatory approvals.
“SoFi is on a mission to help people achieve financial independence to realize their ambitions. Our ecosystem of products, rewards and membership benefits all work together to help our members get their money right. With the secular acceleration in digital-first financial services offerings, SoFi is the only company providing a comprehensive solution all in one app. The new investments and our partnership with Social Capital Hedosophia signify the confidence in our strategy, the momentum in our business, as well as the significant growth opportunity ahead of us. We look forward to helping more people get their money right in the years to come.”
— Anthony Noto, Chief Executive Officer of SoFi
“SoFi’s innovative, member-first platform has demystified financial services for millions of Americans and simplified the process for those looking to apply for loans, invest their money, obtain insurance and refinance their debt, among many other tasks that were previously arcane and needlessly complicated. Additionally, the acceleration of cross-buying by existing SoFi members has created a virtuous cycle of compounding growth, diversified revenue and high profitability. We look forward to partnering with Anthony and his team as they help even more members to achieve financial independence.”
— Chamath Palihapitiya, Founder and CEO of Social Capital Hedosophia V
Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.