• Tue. Apr 13th, 2021

SPAC Stock

Special-purpose acquisition company

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Sofi is a full on banking & Investing platform

Sofi aside from it’s commission free trades also offers a ton of banking solutions at incredible rates. From mortgages, debt consolidation & just general banking it is what Robinhood aspires to be! Currently with over 3 million users expected to join the platform this year SoFi is expanding beyond the USA into Canada & Australia, with the recent announcement of the company merging with IPOE which will capitalize them with $2.4 Billion to do so!

Chamath Palihapitiya leading this merger has launched several SPACs including IPOA, IPOB, IPOC, IPOD, IPOE, and IPOF. He has been helping publicize the SPAC IPOE sending it to the moon recently thanks to the drama surrounding Robinhood and GME stock. This drama stems from Robinhood users not being aloud to buy stock or options in GME stock in fact only having the ability to sell. This lead Chamath to speak out on CNBC as he hinted that SoFi is a much more user friendly platform that didn’t block GME causing the SPAC IPOE to soar 25% the same day!

IPOE & SoFi SPAC Merger

The IPOE and SoFi deal valued SoFi at $8.65 billion post-money. The deal will provide SoFi with $2.4 billion in cash proceeds, including a $1.2 billion in private investment in public equity led by Palihapitiya. SoFi’s enterprise value is about $20 billion as of 2021. In 2019, SoFi raised $500 million at a valuation of $4.3 billion. Its current valuation implies a 5x value to the company’s last private valuation. The merger date for the merger hasn’t been set, the companies expect the deal to close in the first quarter of 2021. The transaction is subject to approval by IPOE shareholders and other customary closing conditions.

How Much Money Sofi Makes

SoFi had 1.8 million customers last year and said it’s forecasting to hit 3 million in 2021, representing year-over-year growth of 66%. Revenue for SoFi was $200 million in the recent third quarter. Fiscal 2020 revenue is estimated to hit $621 million.

SoFi sees fiscal 2021 revenue hitting $980 million, representing year-over-year growth of $980 million. Revenue estimates call for $3.67 billion by fiscal 2025.

SoFi is expected to hit adjusted EBITDA profitability in fiscal 2021 with an estimated $27 million.

How Sofi makes money

SoFi stands for social Finance and is a U.S. online personal finance company. SoFi offers a variety of financial products including student loan refinancing, loans, mortgages, credit cards, and automated and active investments. After the merger SoFi plans to expand globally starting in Canada & Australia which will offer disruption beyond what Robinhood has been able to achieve thus far.

SoFi makes money from lending products like student loan refinancing and personal loans. The company makes money from these products by securitization and selling the loans to investors like pension funds and insurance funds. These buyers pay premium upfront for future cash flows. 

Is Sofi SPAC – IPOE Stock A Buy?

Let’s be forward about this Sofi trades an extremely high multiple as all growth stocks seem to these days but what we have to understand is the risk vs reward. As a long term investor the prospects on it’s future values presuming SoFi achieves its projected growth rate by 2024 will actually be considerably cheap compared to todays valuations.

Now that doesn’t mean SoFi is a buy but I am willing to take a stab at it and risk a small amount on the off chance this becomes a global dominating financial institution. Unfortunately pre merger we take on more volatility risk so thinking long term it may be wise to open a position pre split and cost average in after split! this may offer the best return if the companies long term prospects stay bright!

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