Please ensure Javascript is enabled for purposes of website accessibility

Here's Why This Chamath Palihapitiya-Led SPAC Is Skyrocketing on Friday

By Matthew Frankel, CFP® - Updated Jan 29, 2021 at 11:22AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This fintech-focused SPAC is soaring, and it's not because of a short squeeze.

What happened

The stock market was having a rather negative day on Friday morning, with all major market indexes in the red. But Chamath Palihapitiya-led special purpose acquisition company (SPAC) Social Capital Hedosophia Holdings V (IPOE) was soaring, with shares up by nearly 30% at 10:30 a.m. EST.

So what

There are a few potential reasons investors are interested in this particular SPAC, but the most likely explanation for today's lift is that fintech start-up Social Finance (SoFi), which the SPAC has agreed to take public, offers a trading app that is a direct competitor to Robinhood. Known as SoFi Active Investing, the platform has several features that appeal to younger, active traders, like fractional share investing and the ability to trade cryptocurrencies.

Person using smartphone with graphs projected off the screen.

Image source: Getty Images.

With Robinhood recently halting trading on high-momentum stocks like GameStop and AMC Entertainment Holdings, there has been a major outcry from politicians, market commentators, and most importantly, Robinhood traders. So, it's fair to say that the outrage could lead to some of Robinhood's millions of customers jumping ship to other comparable platforms. And SoFi certainly has one.

It's also not an insignificant detail that SoFi has the only trading platform with a direct association to Palihapitiya, whose influence over younger traders and investors could certainly give SoFi's trading platform, and its entire personal finance ecosystem, a nice boost.

Now what

SoFi is more widely known for its personal loans and other lending operations than its stock trading platform, which makes sense since it's a relatively new side of the business. However, the surge in trading popularity, general investor disappointment with some of Robinhood's latest moves, and its association with Palihapitiya could ultimately bring hundreds of thousands or even millions of people into SoFi's trading app, SoFi Invest. And these are customers that could also be cross-sold other SoFi financial products and services, which could be a needle-mover for the company.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Social Capital Hedosophia Holdings Corp. V Stock Quote
Social Capital Hedosophia Holdings Corp. V
IPOE
GameStop Corp. Stock Quote
GameStop Corp.
GME
$91.48 (-8.87%) $-8.90
AMC Entertainment Holdings, Inc. Stock Quote
AMC Entertainment Holdings, Inc.
AMC
$12.76 (-1.08%) $0.14

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
349%
 
S&P 500 Returns
122%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.