Chamath Palihapitiya speaking at the 23rd Annual Sohn Investment Conference in New York City on April 23, 2018.
Heidi Gutman | CNBC
SoFi, an online finance start-up, is expected to go public when it merges with a blank check company run by venture capitalist Chamath Palihapitiya, the companies announced on Thursday.
The merger with SPAC of Palihapitiya, 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 raised money from venture capital giants like SoftBank and Peter Thiel, according to PitchBook.
SPAC shares buying SoFi rose 29% on Thursday’s trading session after the announcement. Reuters first reported the deal.
Special-purpose procurement companies, known as SPACs, raise money through a shell company to buy an existing company. It is an increasingly popular way for start-ups at an advanced risk stage to get listed in public markets quickly.
Palihapitiya – one of the first Facebook executives – went public with several companies through SPACs, including Virgin Galactic Holdings in late 2019. Another blank check company founded by Palihapitiya is set to merge with Opendoor Labs supported by SoftBank, while an agreement to make Clover Health public through a shell company also closed on Thursday.
SoFi was an attractive bet based on its ability to meet the needs of consumers who prioritize mobility and reduce the cost of banking services through technology, according to Palihapitiya. He compared SoFi’s disruption in banking technology to Amazon.
“What I did was try to systematically find out what was broken in the banking industry and find out which company was the best representative of the solution that people wanted,” Palihapitiya, founder and CEO of Social Capital Hedosophia V, told the CNBC break report On thursday . “Sofi was at the top of the list when I looked at all the companies.”
SoFi was founded in 2011 with a focus on refinancing student loans for Gen Y and now offers stock and cryptocurrency trading, personal and mortgage loans and wealth management services. The company is chaired by CEO Anthony Noto, former chief operating officer of Twitter and former managing director of Goldman Sachs.
The San Francisco-based company also signed a 20-year contract to call the Los Angeles football complex “SoFi Stadium”. SoFi is an official partner of both Los Angeles football teams, as well as a partner of the performance venue and the surrounding entertainment district.
Noto said that “business certainty” was one of the reasons why SoFi opted for a SPAC, rather than the traditional IPO process. As the economy moves online during the pandemic, Noto highlighted SoFi’s strategic advantage of building a financial company that prioritizes mobility.
“We create faster experiences, provide better selection, content and convenience to really capture those looking for that online banking experience,” Noto told CNBC.
— Scott Wapner of CNBC contributed reporting.