IPOE Stock: Practice Patience with Hedosophia Holdings Corp. V

In early March 2021, I wrote another article on Social Capital Hedosophia Holdings, the company that has six SPACs (Special Purpose Acquisition Companies) in development. The title was “Wait and see when it comes to Hedosophia Holdings Stock share capital,” and it was about Share capital Hedosophia Holdings Corp. IV (NYSE:IPOD).

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Now this article is about Share capital Hedosophia Holdings Corp. V (NYSE:IPOE) Stock. And interestingly enough, there is a lot in common in my investment theses regarding these two stocks. But the IPOE action has its own history. The question is, is the story enough to consider buying?

IPOE stock: the basics

The main things investors need to know about this SPAC are the same as in my previous article. First, management is too important. Second, rising bond yields now make stocks vulnerable to massive sell-offs, and their valuation declines as the risk-free premium is now higher. And third, evaluation is of paramount importance – always.

Anytime I see a PSPC trading well above the $ 10 share price, which is most common for PSPC’s initial public offering (IPO) price, I worry about the Evaluation. Interestingly, when I wrote the article on IPOD stock at the beginning of March 2021, the stock price was $ 13.19 and at the close of March 31, 2021, the stock price was $ 13.19. share was $ 10.96.

What makes the IPOE action different?

SoFi: is a FinTech disruption possible?

SoFi, or Social Finance, Inc., is a San Francisco-based online personal finance company. And it is also the fintech startup that should soon go public thanks to a SPAC merger with Social Capital Hedosophia Holdings Corp. V. How long will it take? In the months most likely.

SoFi says it’s a one-stop-shop for your finances, with its mobile app available for both Apples (NASDAQ:AAPL) iOS devices and the alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) Android devices. The company offers a credit card and a plethora of financial services, such as personal and student loans, home loans, small business financing, and insurance.

At the end of 2020, the World Bank issued a press release titled “FinTech Market Shows Rapid Growth During COVID-19 Pandemic” the key points being,

“[t]The fintech market has continued to help expand access to financial services during the Covid-19 pandemic – particularly in emerging markets – with strong growth in all types of digital financial services except loans, according to a joint study by the World Bank, the Cambridge Center for Alternative Finance to the Judge Business School at the University of Cambridge and the World Economic Forum.

Now, if lending has not seen strong growth then SoFi having a large part of its business operations related to loans can be a problem. This is not positive news for SoFi or IPOE stocks.

SoFi Business Outlook

SoFi appears to be a promising fintech company. After all, the company says it has “over 1,000,000 members and it has.” The continued growth expected is therefore positive and supports business plans aimed at disrupting the financial sector.

And to begin with, the decision taken by SoFi to acquire Golden Pacific Bancorp, Inc. (OTCMKTS:GPBI), the community bank based in Sacramento, Calif., also seems reasonable and smart. Why?

If SoFi is to compete with the big reputable traditional banks, it needs to be regulated. This means that she should be looking to obtain a national banking charter soon.

I will not go into the details of the merger with Capital Social Hedosophia.

And that’s one of the biggest concerns I have about SoFi. Is this valuation justified? For me, the answer is simply no. The following figures shown on the file of the Securities and Exchange Commission (SEC) are far from inspiring:

“Our net losses were $ 141.4 million, $ 239.7 million and $ 252.4 million for the nine months ended September 30, 2020 and the years ended December 31, 2019 and 2018, respectively. As of September 30, 2020, we had a total permanent deficit of $ 380.3 million. We may continue to incur net losses in the future, and these losses can fluctuate significantly from quarter to quarter. We will need to generate and maintain significant revenue for our business in general, and scale up and generate greater operating cash flow from our financial services segment in particular, in future periods in order to achieve, maintain or increase our level of profitability. “

SoFi and IPOE actions: promising yes, cheap no, risky yes

Thus, for a company which started its commercial activities in 2011 and which has difficulty in making a profit, despite a growth in its turnover, this valuation seems too rich. I want to see more than just marketing as disrupting the future of finance.

I want to see profitability. Buying IPOE stocks now is too risky. And the stock doesn’t come cheap either. With a premium of over 70%, as the IPOE share price is now trading around $ 17 per share, compared to the IPO price of $ 10 per share, this huge premium is not warranted. . Pay for the future on the basis of hope? Not a good investment decision.

PSPCs are not suitable for all investors, especially those who use valuation as their primary financial metric. It is the safest way to evaluate a stock, compared to a purely emotional investment.

At the date of publication, Stavros Georgiadis, CFA, had (directly or indirectly) no position in the securities mentioned in this article.

Stavros Georgiadis is a CFA Chartered Equity Research Analyst and Economist. He focuses on US stocks and has his own stock blog at thestockmarketontheinternet.com/. He has written various articles for other publications in the past and can be contacted at Twitter and on LinkedIn.

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