On-line lender SoFi goes public by SPAC, supported by Chamath Palihapitiya

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

Heidi Gutman | CNBC

Online financial startup SoFi will go public by partnering with a blank check company led by venture capital investor Chamath Palihapitiya, the companies said 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 money from venture capital giants like SoftBank and Peter Thiel, according to PitchBook.

Shares in the SPAC, which bought SoFi, rose 29% on Thursday following the announcement. Reuters first reported on the deal.

Special purpose vehicles, called SPACs, raise money through a Shell company to buy an existing business. It’s an increasingly popular way for late-stage startups to quickly list in public markets.

Palihapitiya – an early executive at Facebook – took several companies public through SPACs in late 2019, including Virgin Galactic Holdings. Another blank check company founded by Palihapitiya merged with Opendoor Labs, backed by SoftBank, last month and signed a deal to bring Clover Health to the public with a shell firm also closing Thursday.

SoFi was an attractive bet, according to Palihapitiya, as it was able to meet the needs of mobile-first consumers and cut banking costs through technology. He compared SoFi’s failure in banking technology to Amazon.

“I have systematically tried to figure out what was broken in the banking business and see which company was the best representative of the solution people wanted,” Palihapitiya, founder and CEO of Social Capital Hedosophia V, told CNBC’s “mid-term report” on Thursday: “SoFi was top of the list when I looked at all of the companies.”

Founded in 2011 with a focus on refinancing student loans for millennials, SoFi now offers stock and cryptocurrency trading, personal and mortgage loans, and wealth management services. The company is led by CEO Anthony Noto, the 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 designate the Los Angeles soccer field “SoFi Stadium”. SoFi is the official partner of both LA soccer teams as well as a partner of the venue and the surrounding entertainment district.

Noto said “deal security” was one of the reasons SoFi chose a SPAC over the traditional IPO process. As the economy moves online during the pandemic, Noto highlighted SoFi’s strategic advantage in building a mobile-first finance company.

“We’re creating faster experiences, better choice, content, and convenience to truly capture those looking for that banking experience online,” Noto told CNBC.

SoFi was ranked 8th on the CNBC Disruptor 50 list last year.

— CNBC’s Scott Wapner contributed to the coverage.

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