The online provider SoFi will be made public through a merger with SPAC with the support of Palihapitiya

(Reuters) – U.S. online loan start-up Social Finance Inc (SoFi) said on Thursday it had agreed to go public through a merger with Social Capital Hedosophia Holdings Corp. V, a check acquisition company blank led by venture capitalist Chamath Palihapitiya.

The deal values ​​SoFi at around $ 8.655 billion and is expected to provide up to $ 2.4 billion in cash to the San Francisco-based company.

Reuters had reported on Thursday that SoFi and Social Capital were approaching an agreement to merge. Shares of share capital closed 58% at $ 19.17 each.

“Our goal is to build a unique financial platform and our diversified products can help us navigate both a high-interest and low-interest environment,” SoFi executive director Anthony Noto told Reuters in an interview , adding that the company has seen refinancing home loans. products for businesses and investments grew rapidly over the past year.

SoFi plans to use the revenue to pay off the debt from the $ 1.2 billion acquisition last year of Galileo payment software and to grow its business.

Founded in 2011, SoFi took advantage of the reduction of banks in large bands of consumer lending after the 2008 financial crisis.

It began with student loan refinancing and expanded into mortgages and personal loans. The company said in October that it had received preliminary approval from U.S. regulators for its application to hire a national bank. The company has also branched out into securities trading and cash management instead.

Noto is a former investment banker at Goldman Sachs Group Inc. and a former chief operating officer of Twitter Inc. He was succeeded by SoFi co-founder Mike Cagney, who left the post in 2018.

SoFi said it expects to generate about $ 1 billion in adjusted net revenue by 2021, a 60% year-over-year increase.

Social Capital Hedosophia V is one of three so-called special purpose acquisition companies (SPACs) with the support of American investor Palihapitiya and London-based Ian Osborne, who are currently seeking 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 make projections. in talks with investors, Noto said.

An SPAC is a shell company that collects money in an IPO to merge with a private company that, as a result, goes public.

They have emerged as a popular IPO alternative for companies, providing a way to go public with less regulatory control and more security over the valuation that will be achieved and the funds that will be raised.

Palihapitiya has been one of SPAC’s most prolific sponsors, merging them with several companies, from space tourism firm Virgin Galactic Holdings Inc to home sales platform Opendoor Technologies Inc.

The share capital Hedosophia V raised about $ 800 million in a IPO on the New York Stock Exchange in October.