SoFi Technologies, Inc. provides digital financial services. It operates through three segments: Lending, Technology Platform, and Financial Services. The company’s lending and financial services and products allows its members to borrow, save, spend, invest, and protect their money. It offers student loans; personal loans for debt consolidation and home improvement projects; and home loans. The company also provides cash management, investment, and technology services. In addition, it operates Galileo, a technology platform that offers services to financial and non-financial institutions; and Apex, a technology enabled platform that provides investment custody and clearing brokerage services, as well as Technisys, a cloud-based digital multi-product core banking platform. The company was founded in 2011 and is headquartered in San Francisco, California. The company is publicly listed on NASDAQ under the ticker “SOFI”.
Our considerations
It has been almost one entire year since the fintech sector has started to decline, and not a single stock has been safe. Moreover, we have already seen from PayPal (-22% in one day) to Upstart (-60% in one day), what a weak guidance can do to these names: it’s easy to see why investors are fleeing away from the sector. Indeed, PayPal has declined by almost 70% from its highs and its main competitor, Square, by roughly 60%. Another important player in the sector, which went popular during last year’s retail craziness, is SoFi Technologies Inc., which has lost almost 80% over the last twelve months.
It is interesting to see what happened recently to understand why it is important. Some days ago, SoFi was trading lower in the morning following the terrible reaction that the market had to Upstart’s earnings. Then, in some way, SoFi’s first quarter earnings were “leaked”, and trading was halted for several hours. In these earnings, the quarter results were strong, even though the second quarter guidance wasn’t appreciated. Furthermore, they increased the full year’s guidance. We went through them, and saw nothing to justify a -12% opening, but we assume that many investors jumped to conclusions before having the patience to read the full statement or understand what’s the business about. Indeed, while many still see SoFi as a simple student loan company, assuming that the never-ending moratorium will crush its future results, it is actually a bank, as the OCC approved the request for a national banking charter. We have to understand that OCC doesn’t handle these charters easily, and most importantly it doesn’t handle them out to companies that are on a life saver. Although by looking at the share price chart, one could think that SoFi is indeed on the verge of collapse, the reality is very different. We don’t think that OCC would approve a national banking charter for SoFi, if it had bad compliance practices or was in danger of going-under.
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