SoFi Merging With Palihapitiya-Backed IPOE SPAC

Fintech company SoFi is going public via one of the most well-known names in the SPAC community.

The SPAC Deal: SoFI announced a SPAC merger with Social Capital Hedosophia Holdings V IPOE, led by Chamath Palihapitiya.

The merger values SoFi at an equity value of $8.65 billion post-money. SoFi will receive $2.4 billion in cash proceeds, including a $1.2 billion PIPE led by Palihapitiya. SoFi is being valued with an enterprise value of $6.5 billion.

Palihapitiya and SoFi CEO Anthony Noto have known each other for over 10 years. The duo discussed the deal in an appearance on CNBC’s “Halftime Report."

“He’s completely money in the bank,” Palihapitiya said.

The deal was done with Social Capital and Palihapitiya due to their experience with SPACs, according to Noto.

“They’ve done this a number of times, they’re very experienced,” Noto said.

SoFi chose to go public via a SPAC due to the ability to educate investors more affordably throughout the merger process compared to the traditional IPO route.

Related Link: Chamath Palihapitiya’s IPOD, IPOE, IPOF SPACs: What Investors Should Know

About SoFi: The company’s mission is the help people achieve financial independence by getting their money right. SoFi offers a wide range of services that include loan refinancing, mortgages, personal loans, credit cards, insurance, investing and deposit accounts.

SoFi also owns and operates Galileo, one of the leading technology infrastructure services that helps power the back-end of several of the fastest growing financial services providers.

Galileo has around 50 million accounts on its platform. Palihapitiya pointed out that Galileo customers include Robinhood, Chime, Dave.com and MoneyLion. The enterprise banking infrastructure platform is called “The AWS of fintech” by Palihapitiya.

Noto has experience working with companies like Goldman Sachs GS, Twitter TWTR and the National Football League.

Financials: SoFi had 1.8 million customers last year and said it's forecasting to hit 3 million in 2021, representing year-over-year growth of 66%.

Revenue for SoFi was $200 million in the recent third quarter. Fiscal 2020 revenue is estimated to hit $621 million.

The company sees fiscal 2021 revenue hitting $980 million, representing year-over-year growth of $980 million. Revenue estimates call for $3.67 billion by fiscal 2025.

SoFi is expected to hit adjusted EBITDA profitability in fiscal 2021 with an estimated $27 million.

Growth Ahead: For some consumers, it’s hard to get loans, a problem which SoFI is focused on. Palihapitiya said SoFi believes in advancing financial services for middle America.

“SoFi has fixed all these things,” Palihapitiya said. “The acceleration of cross-buying by existing SoFi members has created a virtuous cycle of compounding growth, diversified revenue and high profitability."

Upselling to existing customers has helped SoFi with growth and remains a major catalyst. Sixty-five percent of home loans for SoFI are upsells from existing members. Twenty-four percent of all products sold by SoFi are upsells from existing customers, according to Palihapitiya.

SoFi also recently received preliminary conditional approval for a national bank charter, which could be a catalyst for the company. Financial projections are likely to change with the bank charter approval.

IPOE Price Action: Shares of Social Capital Hedosphia Holdings V were up 30% before being halted before the CNBC appearance. Shares are up 54% to $18.64 at time of publication.