Social Finance, Inc. (SoFi), a next-generation financial services platform, has entered into a definitive agreement with Social Capital Hedosophia Holdings Corp. V (“SCH”) (NYSE: IPOE), a publicly traded special purpose acquisition company founded by CEO Chamath Palihapitiya, to bring a major consumer-focused financial technology business to the public markets.
The deal, which has been unanimously approved by SCH’s board of directors and the independent directors of SoFi’s board of directors, is expected to close in the first quarter of 2021, subject to approval by SCH’s shareholders and other customary closing conditions, including any applicable regulatory approvals, values the company at an equity value of $8.65 billion post-money. The company’s management team, led by CEO Anthony Noto, will continue to lead SoFi following the transaction.
SoFi is a store for financial services, including loan refinancing, mortgages, personal loans, credit cards, insurance, investing and deposit accounts, that has allowed more than 1.8 million members to borrow, save, spend, invest and protect their money since its inception. Its consumer offering is augmented by its ownership and independent operation of Galileo, a provider of critical technology infrastructure services, including customer-facing and back-end capabilities to financial services providers. Galileo has approximately 50 million accounts on its platform.
SoFi delivered over $200 million in total net revenue in the third quarter of 2020 and is on track to generate approximately $1 billion of estimated adjusted net revenue in 2021, representing year-over-year growth of approximately 60 percent, and full-year adjusted EBITDA profitability. The company also received preliminary, conditional approval from the U.S. Office of the Comptroller of the Currency (OCC) for a national bank charter in October 2020.
The transaction is expected to deliver up to $2.4 billion of gross proceeds to the combined company, including the contribution of up to $805m of cash held in SCH’s trust account from its initial public offering in October 2020. The combination is further supported by a $1.2 billion PIPE at $10 per share led by Chamath Palihapitiya, Founder and CEO of SCH, and Hedosophia, with commitments from funds and accounts managed by BlackRock, Altimeter Capital Management, Baron Capital Group, Coatue Management, Durable Capital Partners LP, and Healthcare of Ontario Pension Plan (HOOPP). SoFi also received a previous anchor investment from funds and accounts advised by T. Rowe Price Associates, Inc.
Existing SoFi shareholders will roll 100 % of their equity into the combined company. Concurrent with closing, $150m of the transaction proceeds will be used for strategic secondary transactions that will help structure SoFi’s pro forma capitalization table in a way that is more conducive to obtaining an OCC national bank charter. All references to available cash from the trust account and retained transaction proceeds are subject to any redemptions by the public shareholders of SCH and payment of transaction expenses.