The Chamath Palihapitiya-led Social Capital Hedosophia Holdings V (IPOE) SPAC is planning to bring Social Finance (SoFi) public in a deal that values the fintech startup at $8.65 billion. IPOE stock surged more than 4 percent on Apr. 22 and was trading higher after hours. What’s IPOE’s stock forecast, and will it rise more?
SoFi is an online personal finance company. Its business combination with IPOE is expected to close at any moment now. IPOE and SoFi had hoped to complete the deal by the end of Mar. 2021, but like many other SPAC mergers, such as the AvePoint-APXT deal, it's been delayed. SoFi will trade under the "SOFI" ticker symbol upon the merger's closure.
IPOE stock is rising
IPOE stock surged 2.3 and 4.1 percent on April 21 and April 22, respectively. The stock rose despite there being no analyst upgrade or company-specific news—much of the increase may have been due to positive investor sentiment after Clover Health stock surged 20 percent on Apr. 16 and another 10 percent on Apr. 19. Palihapitiya took Clover Health public in Jan. 2021.
Investor sentiment also improved after Palihapitiya’s tweet about SEC filings. The tweet said IPOE had recently submitted an amended S-4 to reflect the latest accounting guidelines on SPAC warrants. Once the company has cleared all SEC comments on the filing, the next move will be proxy mailing and a three-week period for shareholders to vote.
IPOE stock has bottomed out
While IPOE stock is still down 44 percent from its 52-week high, it has seen some gains of late. The sell-off seems finished, and IPOE stock might recover now.
IPOE stock seems set to rise more
IPOE stock only reversed recently. The stock could rise more as investors speculate whether IPOE stock is a target for a short squeeze because of its high short interest.
IPOE’s short interest has surged over the last few months. According to Koyfin, IPOE’s short interest as a percentage of outstanding shares rose to 23.9 percent on Apr. 22 from 19.1 percent on Mar. 22 and 11.9 percent on Feb. 22.
IPOE’s stock forecast
IPOE stock looks like a good investment based on SoFi’s strong fundamentals and outlook. The fintech company expects its unique member count to grow to 3 million in 2021 from 1.9 million in 2020.
The IPOE SPAC deal valued SoFi at $8.65 billion. At IPOE's current stock price, SoFi is valued at $13.7 billion. Based on SoFi’s own projections, its revenue should be $980 million and $1.5 billion for 2021 and 2022, respectively. These figures imply price-to-sales multiples of 14x and 9.1x for 2021 and 2022, respectively. In 2025, the company’s price-to-sales multiple is 3.7x, which looks very attractive.
SoFi’s competitors Square (SQ) and PayPal Holdings (PYPL) have market capitalizations of $111.4 billion and $308 billion, respectively. Square and PayPal have next-12-month price-to-sales multiples of 7.8x and 12.0x, respectively.