SoFi aims to become the Amazon of fintech through its Spac deal
SoFi had plenty of options, so its choice of a Spac validates that structure for listing and raising capital. Can it now challenge the biggest US banks?
Equity investors in Social Capital Hedosophia (SCH) Holdings Corporate V, the special purpose acquisition company (Spac) sponsored by Chamath Palihapitiya, a venture capitalist who made his name at Facebook and took Virgin Galactic public through another Spac last year, love his latest deal.
On January 7 it announced a merger agreement with SoFi, the fast-growing fintech that has transformed itself in the last three years from a provider of student loan refinancing funded from warehouse lines for securitization into a full-product challenger to US banks.
SoFi now also offers mortgages, personal loans, savings deposits, payments, credit cards, investments and insurance all in a single app. It is applying for a national banking charter. And while it needs investment to scale up – banking and technology both being capital-intensive businesses – it is becoming a public company just as its financials reach a tipping point where it might soon deliver operating profits.
The stock of SCH Holdings Corporate V shot up 90% on the news.
We believe the next decade will be a golden era for digital financial services
US Spac IPOs famously raised $80 billion in 2020.