SoFi Technologies Downgraded, Price Target Slashed By 50%: 'Expect Regulatory Scrutiny'

SoFi Technologies Inc SOFI tanked in the premarket on Monday.

Earlier this month, the San Francisco-based company had reported upbeat first-quarter results.

However, SoFi's capital levels appear to be “overstated using fair value accounting” and it may need to raise capital this year to support growth, Wedbush analyst David Chiaverini wrote.

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The Analyst: Chiaverini downgraded his SoFi rating from Neutral to Underperform, while slashing the price from $5.00 to $2.50.

The Thesis: SoFi did not report the sales of any personal loans or student loans in the first quarter.

SoFi used “internal modeling assumptions to arrive at its fair value marks, rather than using market-derived marks from actual loan sales,” the analyst stated.

“We fear that if SOFI were to sell loans, it may not achieve the same level of gain on sale margins that were generated in 3Q and 4Q of 104 cents on the dollar,” he added.

“We expect regulatory scrutiny on capital ratios and stress testing to intensify following the failures of SIVB & FRC,” Chiaverini added.

SOFI Price Action: SoFi shares had declined almost 9% to $4.57 at the time of writing on Monday.