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Social Finance: why I like this Charmath Palihapitiya-backed finance SPAC


Social Finance, Inc. (commonly known as SoFi) is an American online personal finance company. A mobile-first service based in San Francisco, SoFi (NASDAQ:SOFI) provides a one stop suite of financial products that includes student loan refinancing, mortgages, personal loans, credit card, investing (no commissions), cryptos, SPACs and banking through their mobile app.

First of all SoFi is no longer technically a SPAC. Social Capital is the venture firm of Charmath Palihapitiya, a former Facebook (FB) executive. Palihapitiya has used SPACs to buy several companies including Clover Health Investments (CLOV), a digital-first Medicare Advantage insurer, Virgin Galactic Holdings, (SPCE) and Opendoor Technologies (OPEN) in addition to SoFi. SoFi merged with Social Capital Hedosophia Holdings V in an $8.65 billion deal earlier this year. SoFi began trading on June 1.

SoFi stock has been trading in range of $10.10 – $28.26 with a market cap of $18.164 billion. So it has more than doubled from the date of the deal. The company is a sixth-time CNBC Disruptor 50 list member, the seventh SPAC to become public in 2021 from that list. The stock closed at $22.71 Wednesday June 9th.

The first important level is $20, which I hope will hold, but after that the $15 level should hold and I would use it as stop when building a position.

The company has over 2 million users or “members” so it is still early days in its development. SoFi does not have earnings yet so the stock will give investors opportunities to enter in the future. I favour building a position slowly and taking advantage of the drawdowns of the stock. The future looks very promising and I especially like its strategy of targeting the university graduates with student loans. When they advance in society you will have very wealthy members. Many younger generations do everything with their phones and this trend is not going away.

CEO Anthony Noto – a true visionary in internet & mobile apps

CEO Anthony Noto is an industry veteran who has worked previously in Goldman Sachs, the NFL and Twitter. Noto joined Goldman Sachs in 1999 and was voted the top analyst by Institutional Investor magazine for his research on the Internet industry. Noto led the communications, media and entertainment research team at Goldman Sachs, and provided strategic direction and resource allocation for the group. He became a managing director in 2003, and a partner in 2004.

On 24 February 2008, Noto took over the job of CFO for the National Football League, a position left vacant since former CFO, Barbara Kaczynski, left in February 2003. Noto held the position until October 2010, but left just prior to the negotiations, which led up to the 2011 lockout. He returned to Goldman Sachs in October 2010 as the co-head of Goldman’s global media group. In 2013, Noto helped Goldman score one of the “biggest tech prizes around” when the company won the role of lead underwriter for Twitter’s initial public offering. Noto would work as the main banker dealing with Twitter. SoFi is the main sponsor of the LA Rams’ brand new stadium in Los Angeles, California, which will have fans attending this season.

Twitter and SoFi

In May 2014, Noto announced that he would be leaving Goldman Sachs to join the New York-based hedge fund Coatue Management LLC. However, on 1 July 2014, Twitter CEO Dick Costolo announced that Noto would join Twitter as the company’s CFO. The two men had built a good relationship the previous year when Noto managed Twitter’s account while at Goldman Sachs. In 2014, Noto received total compensation of $73 million. On January 20, 2018, it was confirmed that Noto was leaving Twitter to become the CEO of SoFi (Social Finance, Inc.).

SoFi was founded in 2011 by Mike Cagney, Dan Macklin, James Finnigan, and Ian Brady, four students who met at the Stanford Graduate School of Business. The founders hoped SoFi could provide more affordable options for those taking on debt to fund their education. The company’s inaugural loan program was a $2 million pilot at Stanford. For this pilot, 40 alumni invested about $2 million in approximately 100 students, for an average of $20,000 per student. SoFi started with student loans in 2011 and now in 2021 have the only one stop shop mobile application where you can do all your financial transactions.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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