Social Capital Hedosophia Holdings V Corporation (IPOE) is a SPAC led by Chamath Palihapitiya. IPOE launched with the intention of merging with a private technology company. IPOE is going to merge with the fintech company Social Finance, also known as SoFi.
IPOE stock has risen about 97 percent since the announcement of the merger with SoFi. What was the catalyst for the significant stock movement and how does SoFi compare to MoneyLion? MoneyLion also plans to go public through a reverse merger deal with Fusion Acquisition Corp. (FUSE). Between IPOE and FUSE, which is a better SPAC stock to buy?
SoFi versus MoneyLion
SoFi is an online personal finance company that offers financial products including student loan refinancing, personal loans, mortgages, credit cards, savings, and investments. Currently, the company has over 1.72 million users and is on track to reach 3 million users by the end of 2021. In 2020, the company expects to generate sales of $621 million. Also, SoFi expects its sales to grow by 58 percent in 2021 and 53 percent in 2022.
Founded in 2013, MoneyLion is a fintech startup that offers financial advisory, lending, and investment services to customers. The company also offers a credit builder platform that boosts credit scores by as much as 60 points in roughly 60 days. Currently, the company has over 1.43 million users and expects to reach 2.57 million users by the end of 2021. In 2020, the company expects to generate sales of $76 million. Also, MoneyLion expects its sales to grow by 89 percent in 2021 and 79 percent in 2022.
Is SoFi a better fintech company than MoneyLion?
MoneyLion has explicit estimations until 2023, so we'll use the 2023 revenues for the valuation multiple. Based on the pro forma enterprise value for both of the companies and the 2023 revenues, MoneyLion trades at 5.7x, while SoFi trades at 3.1x.
The IPOE SPAC is sponsored by Palihapitiya, who has become known as the king of SPACs. The billionaire has launched six SPACs under the ticker symbols IPOA, IPOB, IPOC, IPOD, IPOE, and IPOF.
IPOA, IPOB, and IPOC merged with Virgin Galactic, Opendoor Technologies, and Clover Health Investments, respectively.
IPOE stock has fallen due to news of a DOJ investigation.
IPOE stock is falling because Hindenburg Research has accused Clover Health and Palihapitiya of fraud and misconduct. The analyst claimed that Clover didn't disclose that it was under a Department of Justice probe.
IPOE stock is a buy on dips
IPOE stock has risen by 139 percent since it went public. The stock has risen by nearly 97 percent since the SPAC announced its merger target. However, the stock has lost nearly 15 percent of its value from the peak of $28.26 on Feb. 1.
IPOE stock looks like a good buy based on valuations and growth prospects. Investors buying the SPAC stock before the merger deal closes are just betting on the reputation of the sponsor. Investors should consider buying IPOE stock due to Palihapitiya’s recent performance at Social Capital. IPOA and IPOB SPACs have performed well. However, IPOE stock is a speculative bet until the IPOE-SoFi merger closes.