Online lender SoFi goes public through merger with Palihapitiya-backed SPAC

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(Reuters) – US online credit startup Social Finance Inc (SoFi) announced a merger with Social Capital Hedosophia Holdings Corp. on Thursday. V, a blank check acquisition firm led by venture capital investor Chamath Palihapitiya.

FILE PHOTO: Chamath Palihapitiya, founder and CEO of Social Capital, presented at the Sohn Investment Conference 2018 in New York City, the United States, April 23, 2018. REUTERS / Brendan McDermid / File Photo

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

Reuters had previously reported on Thursday that SoFi and Social Capital are about to merge. Social capital stocks closed 58% at $ 19.17 apiece.

“Our goal is to build a one-stop financial platform and our diversified products can help us navigate a high and low interest environment,” said Anthony Noto, SoFi chief executive, in an interview with Reuters and added added, the company saw a home loan refinance. Business and investment products have grown rapidly over the past year.

SoFi plans to use the proceeds to repay the debt on its $ 1.2 billion acquisition of Galileo payment software last year and to expand its business.

SoFi was founded in 2011 and benefited from banks cutting large chunks of consumer credit after the 2008 financial crisis.

It started with refinancing student loans and expanded to include mortgages and personal loans. The company announced in October that it had received preliminary approval from US regulators to apply for a national bank charter. The company also specializes in stock trading and cash management accounts.

Noto is a former investment banker for Goldman Sachs Group Inc and former Chief Operating Officer of Twitter Inc. He succeeded SoFi co-founder Mike Cagney, who stepped down in 2018.

SoFi expects adjusted net sales of around $ 1 billion in 2021, an increase of 60% year over year.

Social Capital Hedosophia V is one of three so-called Special Purpose Acquisition Companies (SPACs) that are supported by US investor Palihapitiya and London-based Ian Osborne and are currently looking for acquisitions.

SoFi had planned to do a traditional initial public offering (IPO) in 2021 after raising money in a private round, but opted for the SPAC route because it preferred business security and the ability to forecast conversations with investors said Noto.

A SPAC is a shell company that raises money when it goes public in order to merge with a privately held company that then goes public.

They have proven to be a popular IPO alternative for companies, offering a path to going public with less regulatory oversight and more security in terms of valuation and fundraising.

Palihapitiya was one of the most prolific sponsors of SPACs, merging them with a number of companies, from space tourism company Virgin Galactic Holdings Inc to home sales platform Opendoor Technologies Inc.

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

Reporting by Joshua Franklin in Miami, Anirban Sen in Bangalore, and Krystal Hu in New York; Adaptation by Matthew Lewis and Rosalba O’Brien

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