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SoFi Moving Forward With Pre-IPO and SPAC Offering Plans

By Bram Berkowitz - May 11, 2021 at 4:16PM

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The company was named as an underwriter in a recent SPAC registration statement.

SoFi will soon go public through Chamath Palihapitiya's blank-check company Social Capital Hedosophia Holdings Corp. V (IPOE). SoFi will serve as an underwriter in an upcoming initial public offering (IPO) for a special purpose acquisition company (SPAC).

The move shows that the online lender is moving forward with its plans to allow retail investors to invest in IPOs and SPACs at the pre-listing stage.

SoFi runs an online brokerage as part of its sprawling financial services organization. Earlier this year, the company said it would make it possible for members with at least $3,000 of cash and settled assets in their SoFi Invest accounts to participate in new offerings before they hit the public markets.

Yellow background with letters I.P.O in middle.

Image source: Getty Images.

"We have a very different customer base, members who are high earners, not well served," SoFi's CEO Anthony Noto told Reuters back in March. "It's a client base that is interested in investing, is actively managing a portfolio and focused on financial objectives. Their interest is in line with issuers."

Noto also told Reuters that SoFi has already received regulatory approval to run this pre-IPO business and that the company would obtain shares by acting as a "passive" underwriter on certain IPOs or SPACs.

It can be very advantageous to get in on IPOs before they hit the public markets because by the time that some do, their stock price has already appreciated to a high valuation, offering limited upside for retail investors. 

And while SPACs have not fared well lately, it can also be advantageous to purchase SPAC units early because you can purchase an ordinary share and part of a warrant for $10 per unit. Fifty-two days after the IPO, SPAC shares and warrants separate. 

Bram Berkowitz has the following options: long July 2021 $17.50 calls on Social Capital Hedosophia Holdings Corp. V. The Motley Fool owns shares of and recommends Social Capital Hedosophia Holdings Corp. V. The Motley Fool has a disclosure policy.

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