Fintech start-up SoFi to go public via SPAC backed by Chamath Palihapitiya

Chamath Palihapitiya speaking at the 23rd Annual Sohn Investment Conference in New York City on April 23, 2018.

Heidi Gutman | CNBC

Online finance start-up SoFi is set to go public by merging with a blank-check company run by venture capital investor Chamath Palihapitiya, the companies announced Thursday.

The merger with Palihapitiya’s SPAC, Social Capital Hedosophia Corp V, will value SoFi at $8.65 billion. 

SoFi, short for Social Finance, was last valued at $5.7 billion in private markets, and has raised cash from venture capital giants such as SoftBank and Peter Thiel, according to PitchBook. 

Shares of the SPAC buying SoFi rose 29% in Thursday trading after the announcement. Reuters first reported the deal.

Special purpose acquisition companies, known as SPACs, raise money through a shell company to buy an existing company. It’s an increasingly popular way for late-stage, venture-backed start-ups to list on public markets quickly.

Palihapitiya — an early executive at Facebook — has taken multiple companies public through SPACs including Virgin Galactic Holdings in late 2019. Another blank check company founded by Palihapitiya merged with SoftBank-backed Opendoor Labs last month, while a deal to take Clover Health public through a shell company also closed on Thursday.

SoFi was an attractive bet based on its ability to meet needs of mobile-first consumers and lower the cost of banking through technology, according to Palihapitiya. He likened SoFi’s disruption in banking tech to Amazon.

“What I did was systematically try to future out what was broken in banking, and try to figure out which company was the best representative of the solution people wanted,” Palihapitiya, founder and CEO of Social Capital Hedosophia V, told CNBC’s Halftime Report Thursday. “Sofi was the top of the list when I looked across all the companies.”

SoFi was founded in 2011 with a focus on student-loan refinancing for millennials and now offers stock and cryptocurrency trading, personal and mortgage loans, and wealth management services. The company is run by CEO Anthony Noto, Twitter’s former chief operating officer and a former managing director at Goldman Sachs.

The San Francisco-based company also signed a 20-year deal to call the Los Angeles football compound “SoFi Stadium.” SoFi is an official partner of both LA football teams, as well as a partner of the performance venue and surrounding entertainment district.

Noto said “deal certainty” was among the reasons SoFi chose to go with a SPAC, instead of the traditional IPO process. As the economy moves online during the pandemic, Noto highlighted SoFi’s strategic advantage of building a mobile-first financial company.

“We create faster experiences, provide better selection, content and convenience to really capture those looking for that banking experience online,” Noto told CNBC.

— CNBC’s Scott Wapner contributed reporting.

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