Consumer financial services startup SoFi is going public via a merger with special purpose acquisition company Social Capital Hedosophia Holdings Corp V, one of a series of blank-check companies formed by venture capital investor Chamath Palihapitiya.
The deal, confirmed by SoFi, would value the fintech at $8.65 billion according to the company’s statement. It includes $2.4 billion in cash, encompassing $1.2 billion from a confirmed private placement (a PIPE instrument being led by Palihapitiya himself with participation from Altimeter, Baron Capital Group, BlackRock, Coatue and others), $805 million in funding from the SPAC’s balance sheet, and additional funds from a prior investment into SoFi closed last month led by T. Rowe Price.
An agreement to take SoFi public via a SPAC has been rumored for weeks. This latest advancement, which reveals Palihapitiya as the possible SPAC connection, was first reported by Reuters.
SoFi, which is now led by ex-Twitter COO Anthony Noto, was founded more than a decade ago to offer ways to secure better financial terms for student loans. The company has expanded those offerings for consumers such as loan, investment and insurance products as well as cash and wealth management tools. It made a move into the B2B realm with its acquisition last April of Galileo.
SoFi has raised millions in capital since its founding, the most recent a $500 million round in 2019 that was led by Qatar Investment Authority, a Doha, Qatar-based private equity and sovereign wealth fund. The company was most recently valued at $4.3 billion.
Palihapitiya has been credited for kicking off the SPAC craze. SPACs, also known as blank check companies, are formed for the purpose of merging or acquiring other companies. The shell company raises money in an initial public offering with the intent of merging with a privately held company that then becomes publicly traded. A slew of SPACs have occurred in the past 18 months.
In 2017, he raised $600 million for his first SPAC called Social Capital Hedosophia Holdings, which was ultimately used to take a 49% stake in the British spaceflight company Virgin Galactic. Social Capital Hedosophia Holdings Corp V is Palihapitiya’s third SPAC. His second merged with Opendoor in 2020.
Update January 7, 2020: Includes official deal details from SoFi.