Why the shares of the company taking SoFi to the stock exchange are rising today


What happened

Chamath Palihapitiya Blank Check Company Shares, Share capital Hedosophia Holdings V (NYSE: IPOE), rose 11% at one point today upon learning that it could complete its merger with online lender SoFi as early as May 28. SoFi could start trading on the Nasdaq under its own symbol, “SOFI”, as early as June 1.

So what

Social Capital Hedosophia Holdings V is one of several Special Purpose Acquisition Companies (SPACs) launched by Palihapitiya. PSPCs are essentially shell companies that raise capital with the intention of merging with a private company and making it public.

Investors have generally looked favorably on SoFi and its broad offering of financial services, which include personal loans, student loans, and mortgages, as well as checking accounts, credit cards, online brokerage, and more.

Image source: Getty Images.

But ties to Palihapitiya appear to have hurt the course of his action, especially after a February report accused Palihapitiya of misleading investors over another SPAC.

Now what

IPOE shares gave up some of their gains, but still traded more than 8% higher in the last hour of trading.

Many investors, including myself, see a great company in SoFi, which is already rapidly growing its membership and selling multiple products to its members, which increases profitability per member and lowers customer acquisition costs.

I think the company’s stock price will perform a lot better once it starts trading on its own and isn’t so closely associated with PSPCs or Palihapitiya.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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