Chamath Palihapitiya speaking at the 23rd Annual Sohn Investment Conference in New York City on April 23, 2018.
Heidi Gutman | CNBC
The online financing company SoFi will be put into operation by merging with a blank check company run by venture capitalist Chamath Palihapitiya, the companies announced on Thursday.
The merger with Palihapitiya’s SPAC, Share Capital Hedosophia Corp V, will value SoFi at $ 8.655 billion.
SoFi, short for Social Finance, was last valued at $ 5.7 billion in private markets and has raised cash from venture capital giants such as SoftBank and Peter Thiel, according to PitchBook.
Following the announcement, shares of the purchase of SoFi SPAC rose 29%. Reuters first reported the deal.
Special-purpose acquisition companies, known as SPACs, raise money through a shell company to buy an existing company. It is an increasingly popular way for emerging companies with advanced purposes to show up quickly in public markets.
Palihapitiya, one of Facebook’s top executives, has brought several companies through SPAC, including Virgin Galactic Holdings in late 2019. Another blank check company founded by Palihapitiya will merge with Opendoor Labs, backed by SoftBank, while a agreement to make public Clover Health an open company also closed Thursday.
SoFi was an attractive bet based on its ability to meet the needs of the first mobile consumers and reduce the cost of banking through technology, according to Palihapitiya. He compared the interruption of SoFi in banking technology with Amazon.
“What I did was try to systematically advance what was broken in banking and try to figure out which company was the best representative of the solution that people wanted,” she said Thursday at the CNBC session on CNBC Palihapitiya, founder and CEO of Social Capital Hedosophia V. “Sofi was the head of the list when I examined all the companies.”
SoFi was founded in 2011 with a focus on refinancing student loans for millennials and now offers securities and cryptocurrencies trading, personal and mortgage lending and wealth management services. The company is led by CEO Anthony Noto, former CEO of Twitter and former CEO of Goldman Sachs.
The San Francisco-based company also signed a 20-year deal to call the Los Angeles football complex “SoFi Stadium.” SoFi is an official partner of the two Los Angeles football teams, as well as a partner at the venue and the surrounding entertainment district.
Noto said “the certainty of the deal” was one of the reasons SoFi chose to use a SPAC, rather than the traditional IPO process. As the economy moves online during the pandemic, Noto highlighted SoFi’s strategic advantage of building a first mobile financial company.
“We create faster experiences, we provide better selection, content and convenience to really capture those looking for that online banking experience,” Noto told CNBC.
— CNBC’s Scott Wapner contributed the information.