Fintech startup SoFi is going public through a merger with a special purpose acquisition company (SPAC), Social Capital Hedosophia Holdings
Inside the Numbers
SoFI was previously valued at $5.7 billion in 2020 and has been funded by VC luminaries such as Peter Thiel and Softbank. Following the deal's announcement, the SoFi SPAC has nearly doubled which gives it a valuation of nearly $15 billion.
SPACs have become an increasingly common and popular way for companies to go public. And, Palihapitiya is the leader of this movement, having declared his intention to bring 25 companies public via the method. Some of his most well-known SPACs are Virgin Galactic
SPACs raise money through a shell company to buy an existing, private company. For private companies, it's a cheaper and quicker way to go public and raise money. Additionally, it enables them to bypass the complications and risks of the grueling IPO process.
SoFi offers a variety of financial products such as student loan refinancing, mortgages, personal loans, credit cards, etc. It's become quite popular as a way for people to manage and lower their student loans. From this, it has a platform to sell more products and services such as stock and cryptocurrency trading. The company is run by Anthony Noto who was formerly Twitter's
Stock Price Outlook
Through this, SoFi has amassed an impressive user base and has high margins due to having lower costs than traditional financial institutions. The company's ambition is to be the Amazon
Currently, lending accounts for 75% of revenue, but this is expected to decline in the coming years as financial services take an increasing share. In terms of SoFi's price, the current market environment is extremely friendly for fintech companies. Additionally, fintech seems to be developing similarly to consumer-based Internet companies, where the total addressable market (TAM) was much bigger than expected.
SoFi also has a unique hook in that it's providing value to people by helping them organize and lower their student loan payments. Once, SoFi has them on its platform, they can sell them higher-margin products and services.