IPOE closes in on SoFi merger – are investors buying now?

Social Capital Hedosophia Holdings V Corp (NYSE: IPOE) is peaking interest amongst investors as it closes in on its merger with finance giant SoFi. This merger marks just one of the six SPAC ventures owner Chamath Palihapitiya is pursuing in 2021. The merger news was first announced in early January, driving the stock price up 57%. The merger was set to take place in the first quarter of 2021. However this has since been delayed with investors now awaiting announcement of a shareholder meeting to vote on merger approval. With the transaction just around the corner, this article will breakdown everything you need to know about the IPOE merger.

Key details surrounding IPOE and SoFi merger

Firstly, SoFi is a next generation financial service provider based in California, United States. The company offers “services in a single app that empowers members to borrow, save, spend, invest and protect their money”. SoFi are on track to complete a reverse merger with the Special Purpose Acqusition Company (SPAC) IPOE. The merger transaction is set to translate an equity value of $8.65 billion, making it one of the larger SPAC transactions to take place this year.

Furthermore, the merger is expected to provide $2.4 billion in cash proceeds to SoFi. This includes a fully committed PIPE (investment) of $1.2 billion. IPOE and SoFi still need to meet all regulatory requirements and obtain approval from shareholders prior to completing the merger.

Why are investors bullish on SoFi moving into 2021 and beyond?

Firstly, the merger announcement shed light on SoFi’s recent financial performance. For example, SoFi delivered $200 million in revenue in Q3 2020. The company advised they are forecasted to generate approx. $1 billion of revenue in 2021, which suggests a YOY growth of 60%. The strong revenue growth can be attributed to an additional 1.2 million members forecasted to join in 2021. Furthermore, an SEC filing suggests the company forecasts its adjusted net revenue to hit $3.7 Billion by 2025. In addition, SoFI expects to reach profitability in 2021 (adjusted EBITDA).

Secondly, investors have seriously rallied behind the SPAC mergers pursued by CEO Chamath Palihapitiya. The general consensus is Social Capital Hedosophia are targeting innovative, high growth companies. This provides investors an opportunity to invest in high growth stocks early, hence driving interest in these companies. Hence, we have seen continual interest in the stock. Additionally, it is worth noting the IPOC and Clover Health merger was finalised last month, proving Chamath was able to close a SPAC deal.

“SoFi’s innovative, member-first platform has demystified financial services for millions of Americans and simplified the process for those looking to apply for loans, invest their money, obtain insurance and refinance their debt, among many other tasks that were previously arcane and needlessly complicated. Additionally, the acceleration of cross-buying by existing SoFi members has created a virtuous cycle of compounding growth, diversified revenue and high profitability. We look forward to partnering with Anthony and his team as they help even more members to achieve financial independence.”

Chamath Palihapitiya, Founder and CEO of Social Capital Hedosophia V,

Summary 

I am obliged to remind our viewers that this article is not financial advice but rather investment commentary from extensive research.

In conclusion, the SPAC merger between IPOE and SoFi is closing in on finalisation. The valuation of the transaction proves the fact that this will be one of the larger SPAC mergers to date. The strong revenue outlook for SoFi is promising and likely a driving force in interest across the investor community. However, it is of course too early to tell if the merger will be finalised within the given timeframe. We will continue to cover the IPOE and SoFi merger as it develops.

Written by Tyger Fitzpatrick, Founder of Youth Investment Group.

The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.

Subscribe to our Youtube channel here