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Chamath Palihapitiya speaking at the 23rd Annual Sohn Investment Conference in New York City on April 23, 2018.
Heidi Gutman | CNBC
Online finance startup SoFi is set to go public by merging with a blank check firm run by venture capitalist Chamath Palihapitiya, the companies said Thursday.
The merger with SPAC of Palihapitiya, Social Capital Hedosophia Corp V, will value SoFi at $ 8.65 billion.
SoFi, short for Social Finance, was last valued at $ 5.7 billion in private markets and raised liquidity from venture capital giants such as SoftBank and Peter Thiel, according to PitchBook.
Shares of the SPAC buying SoFi rose 29% on Thursday after the announcement. Reuters first reported the deal.
Special Purpose Acquisition Companies, known as SPAC, raise funds through a shell company to buy an existing company. It is an increasingly popular way for growth stage start-ups backed by companies to register quickly in public markets.
Palihapitiya – an early Facebook CEO – went public with several companies through SPAC, including Virgin Galactic Holdings, in late 2019. Another blank check company founded by Palihapitiya is on the verge of merging with Opendoor Labs, backed by SoftBank, while a deal to make Clover Health a shell company also closed on Thursday.
SoFi was an attractive bet based on its ability to meet the needs of mobile consumers first and lower the cost of banking through technology, according to Palihapitiya. He compared SoFi’s disruption in banking technology to Amazon.
“What I did was systematically try the future of what was broken in the banking industry and try to determine which company was the best representative of the solution that people wanted,” Palihapitiya, founder and CEO of Social Capital Hedosophia V, told CNBC’s half-time report on Thursday. . “Sofi was at the top of the list when I looked through all the companies.”
SoFi was founded in 2011 with a focus on refinancing student loans for millennials, and now offers equity and cryptocurrency trading, personal and mortgage loans, and wealth management services. The company is led by CEO Anthony Noto, former chief executive of Twitter and former chief executive of Goldman Sachs.
The San Francisco-based company also signed a 20-year deal to call the Los Angeles football complex “SoFi Stadium”. SoFi is an official partner of the two Los Angeles soccer teams, as well as a partner of the surrounding venue and entertainment district.
Noto said “the certainty of the deal” was one of the reasons SoFi chose to choose a PSPC, over the traditional IPO process. As the economy evolves online during the pandemic, Noto highlighted SoFi’s strategic advantage of building a mobile-focused financial company.
“We’re creating faster experiences, providing better selection, better content, and better convenience to really capture those looking for that online banking experience,” Noto told CNBC.
— CNBC’s Scott Wapner contributed reporting.
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