Social Capital Hedosophia V Will Perform Much Better After Its Name Change

As its merger with SoFi gets closer to reality, Social Capital Hedosophia Holdings V (NYSE:IPOE) continues to fall. It appears that IPOE stock was the subject of some short-selling activity that is possibly linked to the delay in the merger. The postponement came after the U.S. Securities & Exchange Commission (SEC) updated its guidance about the accounting treatment of special purpose acquisition company (SPAC) warrants.

the Social Finance (SoFi) logo is displayed on a smartphone.

Source: rafapress / Shutterstock.com

But there’s no evidence that the merger will fall through. And as InvestorPlace columnist Vince Martin wrote recently, the merger’s delay won’t impact the value of SoFi. The latter is the company that investors are really looking to bet on. The way I see it, if investors were buying shares of SOFI stock instead of IPOE stock, the share price would be much higher.

With that in mind, those who bought  IPOE stock when it began trading in late 2020 are up by over 50%. However, at one point they would have been up about 150%.  SPAC fatigue may be a real thing, but investors shouldn’t allow it to have an overly large impact on their belief in the future of SoFi.

SoFi Is Growing Quickly

One criticism of SPACs is that it can be too easy for the target companies to escape the kind of scrutiny that is normally part of traditional initial public offerings. But unlike some companies that go public, SoFi has a significant, growing revenue base. In 2020, SoFi generated net revenue, excluding some items, of $621 million . And the company is forecasting that its revenue will reach $1 billion in 2021.

In the third quarter of 2020, SoFi’s sales jumped about 60% year-over-year to $200 million. And that’s partly because the company continues to add members. At the end of 2020, it had approximately 1.9 million unique members.

What may be even more impressive than those numbers is that SoFi expects to deliver positive EBITDA in 2021. When I last wrote about IPOE stock in early April, SoFi’s inability to achieve profitability was my largest source of concern about it.

The company is also forecasting that its revenue will grow to approximately $3.7 billion by 2025. And if, as expected, SoFi is able to obtain a national bank charter after its $22.3 million acquisition of Golden Pacific Bancorp (OTCMKTS:GPBI), that projection may prove to be too conservative.

A Source For Innovative Solutions

JP Morgan Chase (NYSE:JPM) CEO Jamie Dimon recently remarked that fintech companies presented a significant threat to traditional banking. And he could have had SoFi in mind. The company continues to provide innovative solutions that cater to  younger people who are most likely to embrace a shift away from traditional banking.

One of the company’s latest innovations is a credit card with no annual fee that allows members to redeem their reward points in cryptocurrency.

And another InvestorPlace contributor, Dana Blankenhorn, also pointed out other  SoFi assets, such as its SoFi brokerage which competes with Robinhood. SoFi bought the payment processor Galileo for $1.2 billion.

IPOE Stock Is Still Worth Buying

Some SPACs look worse as their merger dates approach. That’s not the case with Social Capital Hedosophia Holdings V; it looked good when the target, SoFi ,was announced. and it  looks better as the merger date approaches.

Once the merger is complete and IPOE stock becomes SOFI stock, it seems likely that the shares will go up. SoFi is a fintech company that isn’t waiting for its public trading debut to become disruptive to the traditional financial sector. And the company is forecasting what appears to be measured and achievable goals.

Chamath Palihapitiya isn’t batting 1.000 when it comes to his SPAC partners. But the art of investing requires discernment. In this case, Palihapitiya has made a good choice,  and the selloff of IPOE stock appears to be overdone.

On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for InvestorPlace since 2019.


Article printed from InvestorPlace Media, https://investorplace.com/2021/05/ipoe-stock-will-look-better-after-merger-is-complete/.

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