Social Capital Hedosophia Holdings (NYSE: IPOE) has seen its stock value decrease over the last month or so after highs of $25 back in February. Indeed its stock surged immediately after the news that this blank check company will be merging with SoFi as part of a SPAC deal. This means that SoFi, an online personal finance company will soon go public. The merged companies will then begin trading under the ticker NYSE: SOFI
If you want to find out what the difference is between a SPAC, an IPO, and a direct listing, our helpful guide can teach you.
But, is this merger a good idea, and should you buy IPOE stock before the deal goes through?
Social Capital Hedosophia Holdings is the latest in a long line of SPAC deals brokered by Chamath Palihapitiya, who is also known as the SPAC king. His successes, which include Virgin Galactic and Clover health, are only a positive for this most recent merger deal, as investors will be wanting to cash in on this new top pick.
SoFi is an exciting company that has been around for about a decade, during which time it has set itself up as a company that provides comprehensive digital banking services. We are now in the era of Millennials and Gen Z’s, where digital banking has become the go-to option for all money matters. For SoFi, they have created a helpful tool to encourage understanding about finances so people can learn to safely handle their money. Its platform now also includes a credit card service and an investment service, where customers can invest in cryptocurrency as well as stocks.
SoFi as a brand has grown in popularity, particularly since the Reddit saga at the start of the year. Indeed, a large rise in interest since the end of December has been seen. This, in combination with its increased presence in the news due to the merger with IPOE its brand will strengthen and it will attract more customers in the coming months, if not over the course of this year.
IPOE raised $805 million at its IPO, this money along with $2.4 billion in cash proceeds will be given to SoFi once the deal is through. Indeed, with these funds and the many developments going on within SoFi’s own company, the bull case for investing in Social Capital Hedosophia Holdings now is very strong.
Whilst the SPAC deal between Social Capital Hedosophia Holdings and SoFi has excited many, the merger is taking longer than expected. Originally planned for the end of the first quarter, it has been delayed and many investors began to feel frustrated. As a result, the stock has dipped down from highs of $25 to around $16 per share.
The uncertainty could be a worrying trend with this SPAC deal, but it does have its reasons. SoFi is currently acquiring the Golden Pacific bank which has put the brakes on the deal as this is a large and rather important acquisition. Furthermore, SoFi is taking steps to become an official chartered bank. This will trigger more regulatory checks, which means the SPAC deal could take longer. Its current expected date to start trading has now been put at May 27. If a delay occurs again, many investors may lose interest and look for opportunities elsewhere.
Is IPOE a good option?
Currently, even though its stock has seen a pullback recently, an investment in IPOE is a good idea. Its future merger with SoFi is exciting and has huge amounts of potential. SoFi’s business is strong and it is a company that many will be keeping their eye on over the next few years, particularly if it becomes a fully chartered bank in its own right.
There could be the potential for instability if the merger date is again delayed. However, once the two companies finally combine, any investment will surely see a good return in the following few months.
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MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.
Contributing Writer at MyWallSt
Poppy likes companies that go the extra mile. Her favorite stock is Amazon because she is fond of its innovation, variety, and creative solutions to sustainability.