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CAPITAL MARKETS

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?

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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
Anthony Noto, SoFi
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US Spac IPOs famously raised $80 billion in 2020.