SoFi Takes SPAC Route for Public Listing with $8.65B Valuation

Online lending platform Social Finance, popularly known as SoFi, confirmed on Thursday its decision to go public with a merger with Chamath Palihapitiya-backed blank-check acquisition company.

The merger deal with Social Capital Hedosophia Holdings Corp V (NYSE: IPOE) has valued SoFi at around $8.65 billion and the transaction is expected to deliver up to $2.4 billion of gross proceeds to the combined entity.

“The new investments and our partnership with Social Capital Hedosophia signify the confidence in our strategy, the momentum in our business, as well as the significant growth opportunity ahead of us,” SoFi CEO Anthony Noto said in a statement.

High Demand for SPACs

Blank-check firms, technically known as special-purpose acquisition companies, have become very popular lately in facilitating the public-listing of privately held companies on US stock exchanges. These dummy companies launch initial public offerings (IPOs) with the sole intention of merger and private companies also find this route of going public suitable as a traditional IPO approach involves higher regulatory scrutiny.

Social Capital Hedosophia Holdings Corp V raised $800 million in its IPO last October and is one of many SPAC’s maintained by Palihapitiya. Following SoFi’s confirmation, share prices of the company surged by almost 58 percent.

Founded in 2011, SoFi emerged as a student loan refinancing startup and later expanded its vertices into other fintech areas. It now offers investment opportunities with several asset classes including cryptocurrencies, and also launched a credit card earlier.

The startup is going public after it received preliminary conditional approval from the US regulator for its federal bank charter.

“SoFi’s innovative, member-first platform has demystified financial services for millions of Americans and simplified the process for those looking to apply for loans, invest their money, obtain insurance and refinance their debt, among many other tasks that were previously arcane and needlessly complicated,” Palihapitiya said.

“The acceleration of cross-buying by existing SoFi members has created a virtuous cycle of compounding growth, diversified revenue, and high profitability.”

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