Chamath Palihapitiya speaks at the 23rd Annual Sohn Investment Conference in New York City on April 23, 2018.
Heidi Gutman | CNBC
SoFi, an online financing start-up, will go public by merging with a blank check company run by venture capital investor Chamath Palihapitiya, the companies announced Thursday.
The merger with Palihapitiya’s SPAC, Social Capital Hedosophia Corp V, will value SoFi at $ 8.65 billion.
SoFi, short for Social Finance, was last valued at $ 5.7 billion in private markets and has raised money from venture capital giants such as SoftBank and Peter Thiel, according to PitchBook.
Shares of the SPAC that bought SoFi were up 29% during Thursday trading following the announcement. Reuters was the first to report the deal.
Special purpose takeover companies, known as SPACs, raise money through a shell company to buy an existing business. It is an increasingly popular way for late venture capital-backed start-ups to get listed quickly in the public markets.
Palihapitiya – an early Facebook executive – floated multiple companies through SPACs in late 2019, including Virgin Galactic Holdings. Thursday also closed a shell company.
SoFi was an attractive bet, according to Palihapitiya, because of its ability to meet the needs of mobile consumers and reduce the costs of banking through technology. He compared SoFi’s disruption in banking technology to Amazon.
“What I did was systematically try to figure out what had broken down in the banking industry and find out which company was the best representative of the solution people wanted,” said Palihapitiya, Founder and CEO of Social Capital Hedosophia V, Thursday to CNBC’s Halftime Report. . “Sofi was at the top of the list when I looked at all companies.”
Founded in 2011 with a focus on student loan refinancing for millennials, SoFi now offers stock and cryptocurrency trading, personal and mortgage loans, and asset management services. The company is led by CEO Anthony Noto, Twitter’s former Chief Operating Officer and a former Managing Director at Goldman Sachs.
The San Francisco-based company also signed a 20-year deal to name the Los Angeles football complex “SoFi Stadium.” SoFi is an official partner of both LA football teams, as well as a partner of the performance venue and the surrounding entertainment area.
Noto said “deal security” was one of the reasons SoFi chose to go for a SPAC, rather than the traditional IPO process. As the economy moves online during the pandemic, Noto highlighted SoFi’s strategic advantage in building a financial company focused on mobile.
“We’re creating faster experiences, offering better selection, content and convenience to really capture people looking for that banking experience online,” Noto told CNBC.
— CNBC’s Scott Wapner contributed to the reporting.