(Reuters) – The US online lending company Social Finance Inc (SoFi) on Thursday said it had agreed to merge with Social Capital Hedosophia Holdings Corp V, a venture capital firm led by venture capitalist Chamath Palihapitiya.
The deal values SoFi at about $ 8.65 billion and is expected to deliver up to $ 2.4 billion in cash revenue to the San Francisco company.
Reuters reported earlier Thursday that SoFi and Social Capital are approaching a deal to merge. Shares of social capital increased by 58% to $ 19.17 apiece.
“Our goal is to build a one-time financial platform, and our diversified products can help us find an environment with high interest rates and low interest rates,” said Anthony Noto, CEO of SoFi, in a interview told Reuters and added that the company has seen refinancing of home loan. business and investment products have grown rapidly in recent years.
SoFi plans to use the proceeds to repay debt from the $ 1.2 billion acquisition of payment software Galileo last year and to grow its business.
Founded in 2011, SoFi benefited from the withdrawal of banks from large amounts of consumer loans in the wake of the 2008 financial crisis.
It started with the refinancing of student loans and expanded to mortgage loans and personal loans. The company said in October it had received preliminary approval from U.S. regulators for the application for a national banking charter. The company also has branches in stock trading and cash management accounts.
Noto is a former Goldman Sachs Group Inc investment banker and former chief operating officer of Twitter Inc. He succeeds SoFi co-founder Mike Cagney, who retired in 2018.
SoFi said it would generate about $ 1 billion in adjusted net revenue by 2021, an increase of 60% year-on-year.
Social Capital Hedosophia V is one of the three so-called special purpose acquisition companies (SPACs) backed by US-based US investor Palihapitiya and Ian Osborne, who are currently seeking acquisitions.
SoFi planned to go through a traditional initial public offering (IPO) in 2021 to raise money in a private round, but chose the SPAC route because it prefers transaction security and the ability to have projections in conversations with investors, Noto said.
A SPAC is a shell company that raises money in a stock exchange to merge with a private company that then trades in public as a result.
It is a popular alternative to IPO for companies, and provides a way to the public with less regulatory scrutiny and more certainty about the valuation that will be achieved and funds that will be raised.
Palihapitiya was one of the most productive sponsors of SPACs and merged it with a range of companies, from the space tourism industry Virgin Galactic Holdings Inc to the platform Opendoor Technologies Inc.
Social Capital Hedosophia V raised about $ 800 million in October on a New York Stock Exchange.
Reporting by Joshua Franklin in Miami, Anirban Sen in Bangalore and Krystal Hu in New York; Edited by Matthew Lewis and Rosalba O’Brien