Big Companies Took a Look at Acquiring SoFi
Earlier this year, the online personal finance and lending platform Social Finance (SoFi) reportedly had talks with the brokerage firm Charles Schwab about a possible acquisition. According to Techcrunch, this was first reported by the Financial Times, and it took place after SoFi raised $500 million in a funding round led by Silver Lake Partners. Both SoFi and Charles Schwab declined to comment on the story.
According to a well-informed source, SoFi also had conversations with several other companies and even received a $6 billion offer from a foreign bank. SoFi was reportedly hoping for an offer in the range of $8 to $10 billion but never received an offer that high.
The offers and expectations aren’t unwarranted.
The company has grown quickly over the past six years, raising over $2 billion in debt and equity financing. In 2015, they received a $1 billion investment from SoftBank which was the single largest fintech investment round to date. At SoFi’s last round of funding, the startup was valued at more than $4 billion, making them the second most valuable VC-backed Fintech company in the United States, being overtaken only by Stripe.
The rapid growth of the Fintech sector has had a big impact on the financial industry over the past few years. It has posed a threat to the traditional banking model; Fintech firms like SoFi are often more convenient and offer more flexibility, personalization, and functionality. If SoFi were acquired by a major bank, this could signal a new direction in the banking industry.
However, it does seem that an acquisition is unlikely to happen anytime soon. Rather than settle for the lower offer of $6 billion, SoFi has alluded to a public offering, tentatively scheduled for 2019.
The San Francisco-based startup got its start in 2011, and it started out by simply refinancing student loans. SoFi's student loan refinancing and consolidation business is still strong and alive today, offering qualified student loan borrowers interest rates as low as 2.54% on consolidation loans.
However, the company’s former CEO Mike Cagney always wanted SoFi to be able to compete with large banks. So the company expanded into mortgages, personal loans, wealth management, and even life insurance. Earlier this year, Cagney predicted SoFi would have over 500,000 customers by the end of the 2017.
SoFi has been in the news for various reasons, including some controversial ones. SoFi had plans to eventually become an industrial bank, but recently withdrew its banking application due to the fallout from leadership changes amid controversy. Several chief officers have left the company recently, and SoFi is currently searching for a permanent CEO replacement.