Online lending startup Social Finance Inc (SoFi) said on Thursday it has agreed to go public through a merger with Social Capital Hedosophia Holdings Corp V, a blank-check acquisition company led by venture capital investor Chamath Palihapitiya.
The deal values SoFi at around $8.65 billion and is expected to provide up to $2.4 billion in cash proceeds to San Francisco-based SoFi.
Reuters had reported earlier on Thursday that SoFi and Social Capital were nearing a deal to merge. Units of Social Capital Hedosophia Holdings Corp V had jumped as much as 47.9% following the report and were trading up 29.7% at $15.72 before the stock was halted.
“The new investments and our partnership with Social Capital Hedosophia signify the confidence in our strategy, the momentum in our business, as well as the significant growth opportunity ahead of us,” SoFi Chief Executive Anthony Noto said in a statement.
Founded in 2011, SoFi capitalized on the retrenchment of banks from large swaths of consumer lending in the aftermath of the 2008 financial crisis.
It started with refinancing student loans and expanded into mortgages and personal loans. The company said in October it had received preliminary, conditional approval from the U.S. Office of the Comptroller of the Currency in its application for a national bank charter. The company has also branched out into stock trading and cash management accounts.
Social Capital Hedosophia V is one of three so-called special purpose acquisition companies (SPACs) backed by U.S. investor Palihapitiya and London-based Ian Osborne that are currently looking for acquisitions.
“We look forward to partnering with Anthony and his team as they help even more members to achieve financial independence,” Palihapitiya said.
A SPAC is a shell company that raises money in an initial public offering (IPO) to merge with a privately held company that then becomes publicly traded as a result.
They have emerged as a popular IPO alternative for companies, providing a path to going public with less regulatory scrutiny and more certainty over the valuation that will be attained and funds that will be raised.
Palihapitiya has been one of the most prolific sponsors of SPACs, merging them with a range of companies, from space tourism firm Virgin Galactic Holdings Inc to home-selling platform Opendoor Technologies Inc.
Social Capital Hedosophia V raised around $800 million in an IPO on the New York Stock Exchange in October.
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