Over the past year, there's been a surge in SPACs (special purpose acquisition companies), and in 2021, SPACs have raised more funds than traditional IPOs. Recently, the Social Capital Hedosophia Holdings V (IPOE) SPAC announced a merger with online personal finance company SoFi. Many investors are wondering how much SoFi is worth before the IPOE merger date.
On Apr. 9, IPOE stock fell 2 percent, and it was even lower in premarket trading on Apr. 12. The stock has fallen more than 37 percent from its 52-week high on Feb. 1. All SPAC stocks, including those that have already announced an acquisition target, have fallen.
The IPOE-SoFi merger date isn't final, but it's imminent
IPOE and SoFi haven’t set a firm date for their merger closure. While announcing the merger on Jan. 7, the companies stated that they expect the deal to complete in first quarter of 2021, but it seems to have been postponed. Whereas the boards of directors on both sides have unanimously approved the transaction, it still needs approval from IPOE investors.
How much is SoFi worth?
IPOE has assigned SoFi a pro forma implied equity value of $8.65 billion. Meanwhile, at IPOE’s current stock price, SoFi is valued at around $15.4 billion. After adjusting for its $1.9 billion in net cash, SoFi would have a pro forma enterprise value of $13.5 billion. The company’s 2021 and 2022 EV-to-sales multiples are 13.8x and 9.0x, respectively. The company’s 2025 EV-to-sales multiple of 3.7x looks much more attractive. According to Investor Place, IPOE's fair value is $23.91 per share, which represents 35 percent growth from its Apr. 9 price.
SoFi provides a wide variety of fintech offerings, from lending to investing. In the lending space, the company faces competition from PayPal (PYPL) and Square (SQ), which have market capitalizations of $312.4 billion and $118.9 billion, respectively, and next-12-month EV-to-sales multiples of 12.0x and 8.3x.
In the investing space, SoFi competes with Robinhood and eToro. The latter is also going public through a reverse merger deal, with the FinTech Acquisition Corp. V (FTCV) SPAC. eToro is valued at around $15 billion at FTCV’s current stock price, and after adjusting for its $796 million in net cash, eToro would have a pro forma enterprise value of $14.2 billion. The company’s 2021 and 2022 EV-to-sales multiples are 13.9x and 11.9x, respectively.
Is SoFi a good buy at this price?
The recent weakness in IPOE stock may offer a bargain opportunity. SoFi expects to generate sales of $980 million in 2021, $1.5 billion in 2021, and $3.7 billion in 2025.
In its deal with IPOE, SoFi will receive $2.4 billion in cash proceeds, including the $805 million that IPOE raised in its IPO and a fully committed $1.2 billion in PIPE. With adequate liquidity, management can focus on growing the company rather than thinking about project funding. SoFi is also looking forward to opening a bank, which will widen its credit business.