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InvestorPlace’s Joel Baglole recently discussed venture capitalist Chamath Palihapitiya 15% sale of its assets in SoFi Technologies (NASDAQ:SOFI) Stock.

Source: rafapress /

The news, which has put pressure on SOFI shares, should be of little consequence to anyone investing in SoFi.

Here’s why.

The SOFI share is one of the many investments

Anyone who follows specialized acquisition companies knows that SPACs aren’t necessarily meant to be big investments – although they can be – for SPAC sponsors. Instead, the sponsors are there to attract other investors and find a suitable company to merge with, so that they can put the money raised to good use.

In the case of SoFi, he merged with Share capital Hedosophia Holdings Corp. V, May 28. SCH Sponsor V LLC, the partnership between Social Capital, the venture capital firm of Palihapitiya, and Hedosophia, the investment firm of Ian Osborne, raised $ 300 million in October 2020 to bring into play.

When Social Capital Hedosophia announced the merger in January, its presentation indicated that Social Capital Hedosophia, the sponsor, would own 2.3% of the merged entity. However, in the PIPE (private investment in public capital) noted on page 49 of its presentation, Social Capital and Hedosophia have invested $ 275 million, good for another 3.2% [$275M/1.225B multiplied by 14.2%].

At the time of the merger, SoFi shareholders owned 74.2% of the company. These are the shareholders who should care about investors the most.

Some of the other selling shareholders

If you look at the November 15 supplement to its prospectus, you’ll see that several insiders were selling stocks totaling 50 million shares in a secondary offer. Of these 50 million, ChaChaCha SPAC 5 LLC, an entity controlled by Palihapitiya, sold 5.36 million shares in the offering, reducing its stake to 28.68 million, or 3.6% of the company.

SoftBank Group (OTCMKTS:SFTBY), on the other hand, sells 22.51 million shares, reducing its stake from 14.6% to 11.8%. However, he remains the largest shareholder of SoFi, holding more than 3 times as many shares as Palihapitiya.

SoftBank first invested in SoFi as part of the company’s Series E funding in September 2015.

“SoftBank is looking to invest in large industries or geographies that are ripe for change,” said Nikesh Arora, President and COO of SoftBank Group in his September 2015 press release. “This investment gives SoftBank exposure to the financial services sector, which is one of the largest and most important sectors in the world. SoFi is clearly a game changer in the fintech space.

So the fact that SoftBank is selling some of its shares after more than five years of ownership should not worry investors either. SoftBank is not in the business of permanent holdings.

What is important for investors

The secondary sale of SOFI shares pushed its shares down 12% “from its peak, according to InvestorPlace’s Mark Hake. However, he believes the decline warrants a buying opportunity.

Hake believes that SOFI share is worth $ 25 or maybe more. Currently, it is trading at $ 18.

Wall Street analysts are still fairly positive on SOFI stock. For example, six buy-side Wall Street analysts who wrote about the stock in the past 3 months have an average target price of $ 26.33, according to TipRanks. This represents upside potential of over 29% for SOFI shares, ”Hake wrote on November 20.

SOFI stock has been trading above $ 20 since late October, but far from its 52-week highs.

In early November, I suggested that several fintechs had gone public, indicating that it could be a good time to buy SOFI shares. While November did not work out the way I had hoped for SoFi, I still believe the fintech disruptor will increase in the final days of 2021 and early 2022.

The company released results for the third quarter of 2021, which included a 35.5% increase in revenue from a year ago. In addition, he reached a total of members of 2.9 million, up 96% year-on-year, thanks to the introduction of new products such as SoFi Invest.

SoFi will continue to launch products that meet the needs of its customers, who today number nearly 3 million people.

I continue to love the SoFi share as a long-term financial services company.

As of publication date, Will Ashworth did not hold (directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to the Publication guidelines.

Will Ashworth has been writing about investing full time since 2008. His publications include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger and several others in the United States and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.


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