Online lender SoFi to go public through merger with PSPC backed by Palihapitiya

(Reuters) – U.S. online lending start-up Social Finance Inc (SoFi) said on Thursday it had agreed to go public with a merger with Social Capital Hedosophia Holdings Corp V, a blank check acquiring company run by venture capitalist Chamath Palihapitiya.

The deal values ​​SoFi at around $ 8.65 billion and is expected to provide up to $ 2.4 billion in cash to the San Francisco-based company.

Reuters reported earlier Thursday that SoFi and Social Capital were close to reaching a merger deal. Shares of Social Capital closed up 58% at $ 19.17 each.

“Our goal is to create a one-stop-shop financial platform and our diversified products can help us navigate both a high and low interest rate environment,” Anthony Noto, CEO of SoFi, told Reuters , in an interview, adding that the company had witnessed a home loan refinance. corporate and investment products have grown rapidly over the past year.

SoFi plans to use the proceeds to pay off debt from last year’s $ 1.2 billion acquisition of Galileo payment software and grow its business.

Founded in 2011, SoFi capitalized on the withdrawal of banks from large swathes of consumer lending following the 2008 financial crisis.

It started with the refinancing of student loans and spread to mortgages and personal loans. The company said in October that it had received preliminary approval from U.S. regulators for its application for a national banking charter. The company has also diversified into stock trading and cash management accounts.

Noto is a former Goldman Sachs Group Inc. investment banker and former COO of Twitter Inc. He succeeded SoFi co-founder Mike Cagney, who resigned in 2018.

SoFi said it expects to generate around $ 1 billion in adjusted net income in 2021, a 60% jump year-over-year.

Social Capital Hedosophia V is one of three Special Purpose Acquisition Companies (SPACs) backed by US investor Palihapitiya and London-based Ian Osborne who are currently seeking acquisitions.

SoFi had planned to go public via a traditional initial public offering (IPO) in 2021 after raising funds on a private tour, but chose the SPAC route because it preferred the certainty of the deal. and the ability to make projections during discussions with investors, Noto said.

A PSPC is a shell company that raises funds in an IPO to merge with a private company which then becomes publicly traded.

They have emerged as a popular alternative to IPOs for companies, providing a public pathway with less regulatory scrutiny and more certainty as to the valuation that will be achieved and the funds that will be raised.

Palihapitiya has been one of PSPC’s most prolific sponsors, merging them with a range of companies, from space tourism company Virgin Galactic Holdings Inc to door-to-door sales platform Opendoor Technologies Inc.

Social Capital Hedosophia V raised around $ 800 million during an IPO on the New York Stock Exchange in October.