Financial services company SoFi (SOFI -0.13%) went public when it was bought by a special purpose acquisition company (SPAC) in late 2020 but formally began trading independently in June 2021.
The stock was a favorite among the batch of fintech companies that went public in 2020 and 2021. However, SoFi also got caught up in the bubble that formed in 2021 and popped last year.
Since then, it's been a tough go for the industry, with most tech and fintech stocks that rose to meteoric valuations in 2021 struggling now. If you had invested $2,000 in SoFi in June of 2021, here's how much you'd have now.
A volatile few years
SoFi initially got its start helping borrowers, mostly high-income individuals, refinance their student loans. The company then added more products, such as mortgage and personal loans, and a financial services division, which offers credit cards, bank accounts, online investment brokerage, and money management tools.
Image source: Getty Images.
SoFi also created a technology division with two key acquisitions. In 2020, SoFi purchased Galileo, which helps companies set up various payment capabilities like direct deposit and card issuance. In 2022, SoFi acquired the cloud-based processing specialist Technisys, which helps banks or fintech companies carry out daily banking transactions.
Since the pandemic started in early 2020, SoFi has been dealing with the student loan moratorium, which allowed borrowers to pause federal student loan payments. This hurt student-loan origination volume at the company as borrowers held off on refinancing while waiting for the moratorium to end and to see if permanent student-loan forgiveness withstands legal challenges.
Roughly three years after first being enacted, the moratorium is still in place and the Supreme Court is set to decide on whether President Joe Biden's proposed student loan forgiveness of up to $20,000 for certain borrowers is legal.
Meanwhile, with student loans stalled, SoFi leaned into personal lending and quickly increased loan originations and loan balances. After a long regulatory process, SoFi also obtained a bank charter through its acquisition of the tiny Sacramento, California, lender Golden Pacific Bancorp. The acquisition made it possible for SoFi to gather deposits and hold them on its balance sheet. It also enables the company to hold loans on its balance sheet for longer than it had been and collect recurring loan interest payments instead of just a one-time fee for selling the loans.
At the end of 2022, SoFi still hadn't achieved profitability yet but it does have 5.2 million new members, and management said it expects to reach quarterly profitability by the end of this year.
If you invested $2,000 into SoFi...
If you invested in SoFi in early June right when it completed the merger with the SPAC and started trading independently, then you probably bought shares for about $20. You might have been able to get them cheaper had you bought shares as soon as the SPAC announced that it was taking SoFi public.
As of this writing, shares of SoFi trade at about $6.50 after succumbing to the Federal Reserve's aggressive interest rate hikes. That represents a loss of about 68%, which means your $2,000 would now be worth about $650.
Since June 1, 2021, the S&P 500 has fallen about 3.7%, so you would have been much better off investing in the broader market, although things could change on a longer-term basis.
