5 big revelations in SoFi’s plans to go public, including how the fintech is thinking about the future of student debt and the importance of a bank charter

Chamath Palihapitiya

Summary List Placement

You can add another company to the growing SPAC frenzy.

News broke January 7 that personal-finance startup SoFi, last valued at $4.3 billion, is preparing to go public via special purpose acquisition company Social Capital Hedosophia Holdings Corp V (SCH).

The SPAC, raised by billionaire tech investor Chamath Palihapitiya, founder and CEO of venture firm Social Capital, raised capital in July of 2019 and is the product of a partnership between Social Capital and Hedosophia, a venture firm led by Ian Osborne. In October, SCH hit the public markets.  

See more: SoFi to go public via SPAC backed by billionaire investor Chamath Palihapitiya

Palihapitiya, meanwhile, is no stranger to the SPAC world. In 2020, SPACs backed by Palihapitiya initiated mergers that took the likes of Clover Health and Opendoor public (and in 2019, Virgin Galactic). 

The deal will nearly double SoFi’s valuation to $8.7 billion, and the company is expected to see more than $2.4 billion in proceeds. 

One Monday, SoFi filed its S-4 paperwork, which outlines its plans to go public. Here are five items that stood out in the soon-to-be-public company’s filing.

SCH spoke to more than 33 companies (and evaluated more than 100) before picking SoFi

One of the most interesting notes from the filing is how many companies SCH looked at before picking SoFi. The wide net cast by SCH is indicative of how competitive the market has gotten for SPACs. In 2020, more than 200 SPACs launched, raising over $73 billion. 

SCH analyzed “over 100 potential business combination targets,” connecting with 33 of them to discuss a potential deal, the filing noted. Among the companies SCH looked at were those involved in healthcare, sports, semiconductors, and e-commerce, among other industries. 

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“SCH considered businesses that it believed had attractive long-term growth potential, were well-positioned within their industry and would benefit from the substantial intellectual capital, operational experience, and network of SCH’s management team,” the filing said.

And while the SPAC ultimately entered into non-disclosure agreements with three companies, a meeting between SoFi CEO Anthony Noto and SCH’s president and director Ian Osborne on Dec. 16 culminated in a non-binding letter of intent to bring the fintech public. 

SoFi’s considering offering riskier home loans

SoFi likes to hammer home its customers’ high FICO scores as proof that it’s a responsible lender, but the company said in Monday’s filing that its exploring a move into offering mortgages to riskier customers, which could put them at risk of litigation.

“We do not currently offer but may expand product selection to offer non-qualified home loans, which, unlike qualified home loans, do not benefit from a presumption that the borrower has the ability to repay the loan,” the filing said.

Non-qualified mortgages are ones that don’t meet typical borrowing standards, with different requirements for things like income verification and credit scores.

And while legislation in the wake of the Great Recession and housing crisis of the 2000s provided that lenders typically can’t be held liable in court should qualified home loans go south, those same protections don’t apply to …read more

Source:: Businessinsider – Finance


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