Chamath Palihapitiya speaks at the 23rd Annual Sohn Investment Conference in New York on April 23, 2018.
Heidi Gutman | CNBC
The online financing start-up SoFi is going to become public by merging with a blank-blank company run by venture capitalist Chamath Palihapitiya, the companies announced on Thursday.
The merger with Palihapitiya 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 raised cash from venture capital giants such as SoftBank and Peter Thiel, according to PitchBook.
Shares of SPAC buying SoFi rose 29% in trading on Thursday 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 risk-averse late-start-ups to be listed quickly in public markets.
Palihapitiya – an early executive at Facebook – took over several public companies through SPACs, including Virgin Galactic Holdings at the end of 2019. Another empty check company set up by Palihapitiya is to merge with Opendoor Labs, backed by SoftBank, in while a deal to make public Clover Health a shell company also closed on Thursday.
SoFi was an attractive bet based on its ability to meet the needs of mobile consumers and reduce banking costs through technology, according to Palihapitiya. He compared the disruption of SoFi in banking technology to Amazon.
“What I did was to systematically try to find out what was broken in the banking field and try to find out which company is the best representative of the solution that people want,” Palihapitiya said on Thursday. the founder and CEO of Hedosophia V Social Capital, for the newspaper’s CNBC report. . “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 millennia and now offers stock and cryptocurrency trading, personal and mortgage lending and wealth management services. The company is led by CEO Anthony Noto, former CEO of Twitter and former CEO of Goldman Sachs.
The San Francisco-based company has also signed a 20-year deal to name the Los Angeles football complex “SoFi Stadium.” SoFi is the official partner of both football teams in LA, as well as a partner of the venue and the surrounding entertainment district.
Noto said that the “certainty of the agreement” is one of the reasons why 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 financial company.
“We create faster experiences, offer better selection, content and convenience to truly surprise those looking for this online banking experience,” Noto told CNBC.
— Scott Wapner of CNBC contributed to the reporting.