On-line lender SoFi goes public by means of SPAC, supported by Chamath Palihapitiya

Chamath Palihapitiya speaks at the 23rd Annual Son Investment Conference in New York City on April 23, 2018.

Heidi Gutman | CNBC

Online financial start-up SoFi will go public by partnering with a blank check company led by venture capital investor Chamath Palihapitiya, the companies said Thursday.

The merger with Palihapitiya’s SPAC, Social Capital Hedosophia Corp V, will value SoFi at $ 8.65 billion.

SoFi, short for Social Finance, was last valued at $ 5.7 billion in private markets and has raised money from venture capital giants like SoftBank and Peter Thiel, according to PitchBook.

The shares of the SPAC, which bought SoFi, rose 29% Thursday after the announcement. Reuters first reported on the deal.

Special purpose vehicles, called SPACs, raise money through a Shell company to buy an existing business. It’s an increasingly popular way for late-stage startups to quickly list in public markets.

Palihapitiya – an early executive at Facebook – took several companies public through SPACs in late 2019, including Virgin Galactic Holdings. Another blank check company founded by Palihapitiya merged with Opendoor Labs, backed by SoftBank, last month and signed a deal to bring Clover Health to the public, a Shell firm also closed on Thursday.

SoFi was an attractive bet, according to Palihapitiya, as it was able to meet the needs of mobile-first consumers and cut banking costs through technology. He compared SoFi’s failure in banking technology to Amazon.

“I have systematically tried to figure out what was broken in the banking business and see which company is the best representative of the solution people want,” Palihapitiya, founder and CEO of Social Capital Hedosophia V, told CNBC’s “mid-term report” on Thursday: “SoFi was top of the list when I looked at all of the companies.”

Founded in 2011 with a focus on refinancing student loans for millennials, SoFi now offers stock and cryptocurrency trading, personal and mortgage loans, and wealth management services. The company is led by CEO Anthony Noto, former Twitter Chief Operating Officer and former Managing Director of Goldman Sachs.

The San Francisco-based company also signed a 20-year contract to designate the Los Angeles soccer field “SoFi Stadium”. SoFi is the official partner of both LA soccer teams as well as a partner of the venue and the surrounding entertainment district.

Noto said “deal security” was one of the reasons SoFi chose a SPAC over the traditional IPO process. As the economy moves online during the pandemic, Noto highlighted SoFi’s strategic advantage of building a mobile-first finance company.

“We’re creating faster experiences, better choice, content, and convenience to truly capture those looking for that banking experience online,” Noto told CNBC.

— CNBC’s Scott Wapner contributed to the coverage.

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