Earlier this year, Chamath Palihapitiya’s special purpose acquisition company (SPAC), Social Capital Hedosophia Holdings V (NYSE:IPOE) announced its intention to merge with financial services platform SoFi. As you would expect, this disclosure propelled IPOE stock to higher prices.
At that time, the merger deal was expected to close by the end of the first quarter of 2021. Yet, we are now past that time frame and the merger still isn’t finalized.
Of course, this doesn’t mean that the merger won’t happen. Investors just need to be patient and hold their shares if they still see value in SoFi.
Today, I’ll try to keep you motivated by presenting the bull thesis for SoFi. First, though, I’ll explain why the stock price appears to be a bargain at the moment.
A Closer Look at IPOE Stock
Interestingly, even prior to the Jan. 7 announcement of the SoFi reverse merger, IPOE stock was already starting to creep upwards from $10 to $12.
That’s already a pretty decent gain, but the best was yet to come. The big announcement happened, and the share price then rocketed up to a 52-week high of $28.26 on Feb. 1.
In hindsight, we now know that this rally was too much, too fast. Thus, IPOE stock topped out in early February, soon falling below the key $20 level.
Shares are now closer to $16. This could be considered a bargain price for prospective investors who didn’t want to buy at the peak price.
Will the bulls reclaim the $25 level again, and eventually a new high of $30? It’s possible if SoFi can provide enough value – and fintech aficionados should be highly optimistic.
Betting on the SPAC King
I’ve heard folks call Palihapitiya the “SPAC king” before, and that moniker seems to be well deserved.
Famously, Palihapitiya successfully helped to bring Virgin Galactic (NYSE:SPCE) and OpenDoor Technologies (NASDAQ:OPEN) public.
This time around, Palihapitiya and Social Capital Hedosophia Holdings V are truly swinging for the fences with ambitions of disrupting finance as we know it.
In a presentation filed with the U.S. Securities and Exchange Commission, Social Capital Hedosophia Holdings V notes the emergence of more modern banks called “neobanks.”
Presumably, SoFi would fall into the category of “neobanks” as it’s a tech-enhanced, full-service consumer services platform that appears to target younger generations of consumers, such as millennials and Generation Z.
The stakeholders should be glad to learn that over 3 million members are projected to use SoFi in 2021. This would imply a 75% growth rate from the roughly 1,718,000 SoFi members reported in January of this year.
Expanding Its Footprint
If IPOE stockholders want more evidence that SoFi is a great fintech firm to place their bets on, here’s an encouraging development.
According to a press release, SoFi has agreed to acquire Sacramento, California-based community bank Golden Pacific Bancorp (OTCMKTS:GPBI).
The total cost, at the time of the announcement, was estimated to be approximately $22.3 million.
This move should prove to be a crucial step in SoFi’s path to obtain a national bank charter.
SoFi CEO Anthony Noto explained why this is important for his company, saying, ““We believe that by pursuing a national bank charter, we will be able to help even more people get their money right with enhanced value and more products and services.”
Even beyond those benefits, I would add that obtaining a national bank charter should add an enhanced sense of legitimacy and validation to SoFi, while also expanding the fintech company’s market footprint.
The Bottom Line
As you can see, SoFi has the potential to be a game-changer in the fintech space, and perhaps in the banking space generally.
This should be exciting for IPOE stockholders, so it’s best to just be patient and trust that Palihapitiya’s venture into fintech will provide strong returns in the long term.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
