After the market closed on July 15, 2022, SoFi Technologies (SOFI) filed for a massive $1 billion mixed
shelf offering. At the time of filing the company had a ~ $6 billion market capitalization. The severe
dilution is troubling.
SoFi is a fintech. It may quickly develop and sell online products. But it needs to drive customer growth
faster than the industry average. So far, its generous advertorial spending is leading to more losses. In
addition, its reported $400 million payment for the football stadium over 20 years now looks foolish.
The banking sector is facing a major slowdown. Banks like JP Morgan (JPM) and Citigroup paused share
buybacks to brace for a slowdown. Those firms will grow net interest income, lifting their free cash flow.
Conversely, SoFi is too small to earn sufficient interest income. It needed the cash raised to fund
operations or acquire for growth.
SoFi investors face serious risks ahead. They thought that the bank charter was a catalyst for its growth.
Instead, Sofi spent generously to acquire Technisys in February 2022. It paid $1.1 billion or 84 million
SOFI stock, diluting trusting shareholders by under 10%.
Beware of Sofi from here.