The online lender SoFi will become public by merging with SPAC supported by Palihapitiya

(Reuters) – US online lending startup Social Finance Inc (SoFi) said on Thursday it had agreed to go public through a merger with Social Capital Hedosophia Holdings Corp V, a check-free acquisition company led by the capital investor risk Chamath Palihapitiya.

The deal values ​​SoFi at about $ 8.65 billion and is expected to provide up to $ 2.4 billion in revenue to the San Francisco company.

Reuters had reported earlier on Thursday that SoFi and Social Capital were approaching a merger agreement. The share capital closed 58% at $ 19.17 a piece.

“Our goal is to build a unique financial platform and our diversified products can help us navigate both a high-interest and low-interest environment,” SoFi chief executive Anthony Noto told Reuters in a statement. an interview, adding that the company has seen the refinancing of the home loan business and investment products have grown rapidly in the last year.

SoFi plans to use the proceeds to repay debts from last year’s $ 1.2 billion acquisition of Galileo payment software and to grow its business.

Founded in 2011, SoFi has capitalized on the reduction of banks from a large share of consumer loans following the 2008 financial crisis.

It began with the refinancing of student loans and expanded into mortgages and personal loans. The company said in October that it had received preliminary approval from US regulators for its application for a national bank card. The company also branched out into stock trading and cash management accounts.

Noto is a former investment banker at Goldman Sachs Group Inc. and a former chief operating officer of Twitter Inc. He succeeded SoFi co-founder Mike Cagney, who resigned in 2018.

SoFi said it expects to generate adjusted net revenues of about $ 1 billion in 2021, a 60% year-over-year increase.

Hedosophia V is one of three so-called special purpose procurement companies (SPACs), backed by US investor Palihapitiya and Ian Osborne of London, who are currently looking for acquisitions.

SoFi had planned to go public through a traditional initial public offering (IPO) in 2021 after raising money in a private round, but chose the SPAC route because it preferred the certainty of the transaction and the ability to make projections in discussions with investors, said Noto.

A SPAC is a shell company that raises money in an IPO to merge with a private company that then becomes publicly traded as a result.

They have emerged as a popular alternative to IPOs for companies, providing a path to advertising with less regulatory control and more certainty over the valuation that will be achieved and the funds that will be raised.

Palihapitiya has been one of SPAC’s most prolific sponsors, combining them with a number of companies, from space travel firm Virgin Galactic Holdings Inc to home sales platform Opendoor Technologies Inc.

The share capital Hedosophia V raised around 800 million dollars in a transaction on the New York Stock Exchange in October.