- SoFi’s shares closed up 12% on Tuesday after the online finance company made its public debut.
- SoFi went public by merging with a blank-check company run by investor Chamath Palihapitiya.
- It was a “close call” between Social Capital and two other SPAC finalists, Noto tells Insider.
- See more stories on Insider’s business page.
Billionaire investor Chamath Palihapitiya’s special-purpose acquisition company wasn’t SoFi’s first choice to do a deal. Turns out, there were two other suitors.
“Ultimately, it was the board’s decision to go with Chamath, but it was a very close call between Social Capital and two other finalists on the SPAC side,” SoFi CEO Anthony Noto told Insider. SoFi declined to disclose the other suitors.
Noto said conversations with Palihapitiya started sometime late last November. The deal was originally intended to be a private investment but then transformed.
“I’ve known Chamath for a long time, and we originally were doing a private investment, and as we started to get feedback and thinking about our capital needs, it evolved into really a three-pronged deal,” Noto said.
In January, SoFi and Social Capital Hedosophia Holdings Corp. V, a SPAC backed by Palihapitiya, announced a merger agreement that valued the personal finance company at nearly $9 billion. It provided SoFi with up to $2.4 billion in cash. Before that, SoFi had last raised $500 million in private funding at a $4.3 billion valuation.
Shares of SoFi, which offers a mobile-first personal finance service that includes student loan refinancing, investment services, credit cards, and insurance, closed up nearly 12% at $22.65, after the company’s market debut.
Palihapitiya’s stake in SoFi is just north of 33 million shares, according to the SPAC’s SEC filing. That’s worth about $750 million at Tuesday’s closing price of $22.65 per share.
During the deal negotiations late last year, SoFi wasn’t the only one playing the field. In March, Insider’s Carter Johnson reported that Palihapitiya’s SPAC, Social Capital Hedosophia Holdings Corp V, also casted a wide net before landing on SoFi as its target.
The company analyzed “over 100 potential business combination targets,” connecting with 33 of them to discuss a potential deal, according to its S4 filing with the SEC. Among the companies that the SPAC looked at were those in healthcare, sports, semiconductors, and e-commerce, among other industries.
The SPAC ultimately entered into non-disclosure agreements with three companies. But a meeting between SoFi CEO Anthony Noto and the SPAC’s president and director Ian Osborne on Dec. 16 culminated in a non-binding letter of intent to bring the fintech company public.
Palihapitiya has made a name for himself as the king of SPAC deals, initiating mergers that took companies like Clover Health and Opendoor public. He’s formed a total of six SPACs yielding more than $1 billion.
And while he has been one of the loudest champions of the popular financial instrument, Palihapitiya is also inviting regulators to take a closer look at the blank-check companies that have created a market of “haves and have not.”
In a Bloomberg opinion column published last week, titled “SPACs Need More Oversight and Regulation,” Palihapitiya called on regulators to step in to provide fairness in the SPAC market. “It is time to improve the regulations around the SPAC ecosystem with clear and rigorously enforced standards, to push for high deal quality and appropriate investor protections,” Palihapitiya wrote.
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