- SoFi indicated its intention to begin underwriting public offerings in May.
- Chamath Palihapitiya announced the launch of four new SPACs focused on the biotech sector.
- SoFi Securities will underwrite the new blank-check companies alongside bookrunner Morgan Stanley.
- See more stories on Insider’s business page.
When Chamath Palihapitiya registered four new blank-check companies with the Securities and Exchange Commission on June 2, their proposed stock tickers (all beginning with “DNA”) underscored a new focus: biotechnology.
Palihapitiya is launching Social Capital Suvretta Holdings Corp. I, II, III, and IV through his venture fund, Social Capital, in partnership with Suvretta Capital Management, a biotech-focused hedge fund.
And while the original filings detailed Morgan Stanley as the bookrunner of the SPAC deals, an amendment filed Wednesday with the SEC detailed a new partial underwriter whose name doesn’t come from the ranks of Wall Street.
SoFi Securities, the brokerage arm of the personal finance app that itself debuted in a SPAC deal with Palihapitiya and Social Capital on June 2, will partially underwrite the new biotech blank-check deals. SoFi will receive up to 5% of the total shares allocated by each SPAC to distribute to its retail customers. All four of Palihapitiya’s new SPACs are seeking to raise $200 million each.
While a total value of $800 million is far from the largest blank-check deal to hit the market over the past year — that distinction still goes to Bill Ackman’s $4 billion Pershing Square Tontine Holdings — it does represent a significant marker for SoFi and its broader ambitions to compete with the likes of Wall Street’s largest investment banks.
This isn’t SoFi’s first announced underwriting job. In early May, an SEC filing detailed SoFi and Citigroup will jointly underwrite the launch of LTV Capital Partners, a SPAC seeking to raise $215 million, targeting the tech sector, and sponsored by former StubHub president Sukhinder Singh Cassidy and Jeffrey Housenbold, a venture investor at Softbank Investment Advisors.
SoFi has hopes of breaking into a competitive field
IPO underwriting is a business dominated by Wall Street’s biggest banks, who fight to win high-profile IPO allocations that they can then distribute to prime-brokerage customers like hedge funds.
Retail brokerages — like Schwab, TD Ameritrade, and E-Trade, typically get 10% of IPO deals for their customers. However, brokerages often require customers have upwards of $100,000 in assets to participate. SoFi customers need a minimum account balance of only $3,000 to participate. Robinhood has also begun offering its users access to upcoming IPOs.
And while SoFi faces an uphill battle to win IPOs as an underwriter, CEO Anthony Noto is no stranger to the space. He brings years of experience as the former co-head of global TMT banking at Goldman Sachs.
A source familiar with the matter said that as part of Social Capital’s involvement with SoFi’s own public debut, Palihapitiya had become drawn to the idea of leveraging SoFi as an underwriter for future SPAC deals. Palihapitiya also came to recognize the value of Noto’s experience and SoFi’s broader leadership team, the person said. SoFi is also conducting conversations with other companies around underwriting IPOs and direct listings as well as more SPAC deals, the source added.
On Wednesday, SoFi’s IPO Investing app tool also went live, offering a portal where customers can access information and submit orders for public offerings.
Given their traditionally close association with active sponsors who take a role in managing going public, SPACs are typically considered to be a less heavy lift for investment banks and brokerages relative to traditional initial public offerings — albeit ones that nonetheless still offer the opportunity for considerable fees.
Leave a Reply
Leave a Reply
This site uses Akismet to reduce spam. Learn how your comment data is processed.
