(Reuters) – The US online lending startup Social Finance Inc (SoFi) said Thursday it has agreed to a merger with Social Capital Hedosophia Holdings Corp V, a blank check takeover firm led by venture capital investor Chamath Palihapitiya.
The deal values SoFi at approximately $ 8.65 billion and is expected to bring in up to $ 2.4 billion in cash proceeds for the San Francisco-based company.
Reuters had previously reported on Thursday that SoFi and Social Capital were nearing a deal to merge. Shares of Social Capital closed 58% at $ 19.17 each.
“Our goal is to build a one-stop financial platform and our diversified products can help us navigate both a high-yield and a low-yield environment,” SoFi Chief Executive Anthony Noto told Reuters in an interview, adding that the company has seen home loans refinanced. business and investment products have grown rapidly over the past year.
SoFi plans to use the proceeds to repay debts from last year’s $ 1.2 billion acquisition of payment software Galileo and to grow its business.
Founded in 2011, SoFi benefited from the bank’s withdrawal from large swaths of consumer lending in the wake of the 2008 financial crisis.
It started with student loan refinancing and expanded to mortgages and personal loans. The company said in October that it had received preliminary approval from US regulators for its application for a charter from the national bank. The company has also branched out into stock trading and cash management accounts.
Noto is a former investment banker for Goldman Sachs Group Inc and the ex-chief operating officer of Twitter Inc. He succeeded SoFi co-founder Mike Cagney, who stepped down in 2018.
SoFi said it expects to generate approximately $ 1 billion in adjusted net revenue by 2021, up 60% year-on-year.
Social Capital Hedosophia V is one of three so-called special purpose acquisition companies (SPACs) backed by US investor Palihapitiya and London-based Ian Osborne currently looking for acquisitions.
SoFi planned to go public through a traditional initial public offering (IPO) in 2021 after raising money in a private round, but chose the SPAC route because it preferred the certainty of the deal and the ability to projections in discussions with investors, Noto said.
A SPAC is a shell company that collects money on an IPO to merge with an unlisted company that is publicly traded as a result.
They have emerged as a popular IPO alternative for companies, offering a path to IPO with less regulatory oversight and more certainty about the valuation that will be achieved and the funds that will be raised.
Palihapitiya has been one of the most prolific sponsors of SPACs, merging them with a range of companies, from space tourism company Virgin Galactic Holdings Inc to home selling platform Opendoor Technologies Inc.
Social Capital Hedosophia V raised approximately $ 800 million in an initial public offering on the New York Stock Exchange in October.
Reporting by Joshua Franklin in Miami, Anirban Sen in Bangalore, and Krystal Hu in New York; Edited by Matthew Lewis and Rosalba O’Brien