IPOE Could Be Another Successful SPAC for Chamath Palihapitiya

Will IPOE be another successful SPAC from Chamath Palihapitiya? He's touted as the next Warren Buffett. Should investors buy IPOE stock?

Mohit Oberoi, CFA - Author

Jan. 19 2021, Published 7:32 a.m. ET

SPACs (special purpose acquisition companies) were in the limelight in 2020. A record number of companies listed through the SPAC route last year. Among those who embraced SPACs were Chamath Palihapitiya, Bill Ackman, and SoftBank. Social Capital’s CEO has launched many SPACs including Social Capital Hedosophia Holdings V Corporation (IPOE). Will IPOE be another successful SPAC from Palihapitiya? He's touted as the next Warren Buffett. Should investors buy IPOE stock?

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SPACs and direct listings have emerged as good alternatives to traditional IPOs. A note from Goldman Sachs in December said that SPACs raised $73 billion in 2020, which was a record in itself and more than what companies had raised through the route in the last decade.

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SoFi seeks final banking license

Social Finance or SoFi is a fintech company. There has been a wave of fintech IPOs over the last year. Affirm, which delayed its IPO in 2020, also went public and gave stellar returns. SoFi provides student loan refinancing and offers loans and mortgages online. The company also started offering automated and active investments through its SoFi invest platform.

Last year, SoFi received conditional approval from the U.S. OCC (Office of the Comptroller of the Currency) for a national bank charter. If the company gets a final banking license, it would turbocharge its growth because it would have access to more funds.

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IPOE merger date with SoFi

Earlier in January, SoFi announced a definitive agreement to reverse merge with IPOE. The deal valued SoFi at $8.65 billion post money. The companies expect the deal to close in the first quarter of 2021.

Meanwhile, IPOE stock has been rallying before its upcoming merger with SoFi. The stock gained 5.2 percent on Jan. 15 and is up almost 8 percent in pre-market on Jan. 19. IPOE stock has gained over 62 percent YTD.

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IPOE on Stocktwits

Username ml_invest on Stocktwits thinks that it still isn't too late to enter IPOE stock ahead of its merger with SoFi. Another user by the name SPACS2011 advises holding the stock for the long term, while username Overserved expects IPOE to hit $25 this week. IPO stock was trading just under $22 in pre markets on Jan. 19.

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social capital hedosophi
Source: TIKR
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Chamath Palihapitiya SPACs

So far, Chamath Palihapitiya has launched several SPACs, including:

  • IPOA
  • IPOB
  • IPOC

Last year, he announced three other SPACs.

  • IPOD
  • IPOE
  • IPOF

Should I buy IPOE stock?

The merger deal with IPOE values SoFi at $8.65 billion. The company expects to post revenues of nearly $1 billion in 2021 — a YoY rise of 60 percent. IPOE also expects to post positive EBITDA in 2021. The terms put SoFi’s 2021 price-to-sales multiple at 8.6x, which looks attractive compared to other fintech companies. Based on the rising sales for fintech companies, IPOE could be a good way to play the space.


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