Tech

Chamath Palihapitiya’s SPAC bought two others for an agreement with SoFi.

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  • Shares of SoFi closed 12% Tuesday after the online financial company made its public debut.
  • SoFi went public with a white check company run by investor Chamath Palihapitiya.
  • It was a “close call” between Social Capital and two other SPAC finalists, Noto tells Insider.
  • See more stories on the Insider activity page.

The special-purpose acquisition company of billionaire investor Chamath Palihapitiya was not SoFi’s first choice to make a deal. Turns out, there were two other suitors.

“Ultimately, it was the council’s decision to go with Chamath, but it was a very close call between the Social Capital and two other finalists on the

SPAC
side, “SoFi CEO Anthony Noto told the Insider. SoFi declined to disclose the other claims.

Noto said that talks with Palihapitiya started sometime at the end of last November. The agreement was originally intended to be a private investment but then transformed.

“I’ve known Chamath for quite a while, and originally we were making a private investment, and when we started getting answers and thinking about our capital needs, it evolved into a really triple deal,” Noto said.

In January, SoFi and Social Capital Hedosophia Holdings Corp. V, a SPAC supported by Palihapitiya, announced a merger agreement which valued the personal finance company at nearly $ 9 billion. It provided SoFi up to $ 2.4 billion in cash. Prior to that, SoFi had recently raised $ 500 million in private funding at an estimated $ 4.3 billion.

Shares of SoFi, which offers a first-class personal finance service that includes refinancing student loans, investment services, credit cards and insurance, closed nearly 12% at $ 22.65, after the debut of the company’s market.

Palihapitiya’s stake in SoFi is just north of 33 million shares, according to SPAC SEC Archive. It is worth about $ 750 million at Tuesday’s closing price of $ 22.65 per share.

During the deal negotiations at the end of last year, SoFi was not the only one playing on the field. In March, Carter Johnson of Insider said that Palihapitiya’s SPAC, Social Capital Hedosophia Holdings Corp V, also launched a large network before landing on SoFi as its target.

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The company analyzed “more than 100 potential business combination targets,” connecting with 33 of them to discuss a potential deal, according to its S4 filing with the SEC. Among the companies that the SPAC looked at were those of healthcare, sports, semiconductors and e-commerce, among other industries.

The SPAC recently signed non-disclosure agreements with three companies. But a meeting between SoFi CEO Anthony Noto and SPAC president and director Ian Osborne on Dec. 16 culminated in a letter of intent that is not required to release the fintech company.

Anthony Noto SoFi

SoFI CEO Anthony Noto

Sean M. Haffey / Getty Images


Palihapitiya has made a name for himself as the king of the SPAC business, initiating mergers that have taken public companies such as Clover Health and Opendoor. It has formed a total of six SPACs producing more than $ 1 billion.

And while it has been one of the strongest champions of the popular financial instrument, Palihapitiya also calls on regulators to take a closer look at blank control companies that have created a market of “have and don’t have”.

In a Bloomberg opinion column published last week, titled “SPACs Need More Supervision and Regulation,” Palihapitiya called on regulators to intervene to provide equity in the SPAC market. “It is time to improve regulations around the SPAC ecosystem with clear and rigorously applied standards, to push for high business quality and adequate protections for investors,” Palihapitiya wrote.


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