SoFi Technologies (NASDAQ:SOFI) stock jumped over 13% after posting strong earnings after the market closed on Nov. 10. The fintech company posted negative earnings per share of five cents which was a significant beat over expectations for a 14-cent per share loss. The company also beat revenue estimates posting $277 million versus the $251 million estimate.
But this may be one time where a strong earnings report is burying the lead. There is a larger story propelling SOFI stock higher. The fintech company will be able to offer its members access to pre-IPO shares for the upcoming Rivian IPO.
Rivian Automotive (NASDAQ:RIVN) began publicly trading on Wednesday, Nov. 10 one day after the announcement that its IPO would be priced at $78 making it not only the largest IPO of the year, but the largest U.S. IPO by offer size in almost three decades.
Getting in early on an IPO is almost impossible for most retail investors. However, Rivian offered SoFi members access to 0.5% of pre-IPO shares. This begins to level the playing field for retail investors which were previously shut out from the IPO process.
In an interview with FoxBusiness, SoFi CEO Anthony Noto remarked that the customer base for SoFi is complementary to Rivian’s target customer. That creates an opportunity for Rivian to reach shareholders who are likely to be long-term investors for Rivian stock.
Shooting For the Stars
SoFi was one of the many SPAC stocks to emerge in late 2020. And that may explain why investors bailed on SOFI stock early in the year. The hope (or mythology) behind many SPAC stocks was quickly blunted by the reality that many of these companies are, in fact, speculative risks.
In the case of SoFi, I don’t think investors saw a speculative stock, just a less exciting one. SoFi was introduced as a fintech company that would combine a full menu of options including loans, insurance, and cash management. And consumers can access it all through the company’s mobile app.
In fact, one of the many popular features that SoFi offers its customers is the ability to make trades including trading cryptocurrency.
And the company is doing something right. It currently has nearly three million members which includes 377,000 in the last quarter alone. One reason for that is the company’s acquisition of the Galileo payment processing system. Galileo produces application program interfaces (APIs) that provide “customer-facing and back-end capabilities to fast-growing financial service providers.”
Galileo is owned by SoFi and acts as a gatekeeper of sorts for the rest of the industry. It’s also an essential component for SoFi’s larger ambitions.
Don’t Get Ahead of the Story
Another potential catalyst for SoFi has been their efforts to obtain a bank charter. This would allow the company to compete with traditional banks. Theoretically it would mean that its customers would have no need to access a traditional bank.
Noto says that SoFi has no definitive timeline on when, or if, it was going to be able to get its bank charter. That’s neither good nor bad, it just reflects reality.
However, it does mean that for now SoFi remains primarily a lender. That’s not going to get many investors excited. But if the company is successful in obtaining a banks charter, it will have a lower cost of funds to support further growth. And that is likely to result in the analyst community repricing SOFI stock. If you’re a patient investor with some degree of risk tolerance, you'll want to be in on SOFI stock when that happens.
SoFi Technologies Company Profile
SoFi Technologies provides digital financial services. The company operates through three reportable segments: Lending, Financial Services, and Technology Platform. Its financial services allow its members to borrow, save, spend, invest, and protect their money. The company offers student loans; personal loans for debt consolidation and home improvement projects; and home loans.