Economics

SoFi Priced Itself At Double Its Valuation During Recent M&A Talks

Fintech startup SoFi reportedly mulled a potential sale earlier this year, but the talks evaporated over a hefty asking price. After receiving a non-binding offer of $6 billion from a foreign bank, the online lender pegged its target acquisition price at $8 billion to $10 billion as it negotiated with several US companies, including Charles Schwab, per the Financial Times. That price would have ranked the deal among the most expensive in the fintech space since 2007, per the PitchBook Platform.

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Such a designation wouldn't be entirely undeserved, given SoFi's current status as the second most valuable VC-backed fintech company in the US. It's also one of eight American startups that have raised $500 million+ rounds this year.

But while SoFi could likely fetch a relatively high acquisition price, the $8 billion to $10 billion figure is far more than it appears to be worth. In February, the online lender raised a $500 million round at a valuation of $4.4 billion—and since then, its value has likely dropped amid sexual harassment allegations at the company.

In August, a former SoFi employee filed a lawsuit alleging he was fired after reporting that he'd witnessed managers harassing female coworkers, one of several allegations brought against the company. The next month, co-founder Mike Cagney stepped down from the CEO role. Cagney's resignation has reportedly prompted the company to forgo plans to secure a banking license, something that likely would have boosted its valuation.

Overall, fintech startups worldwide have pulled in about $43 billion across nearly 3,200 deals with VC participation since the beginning of 2015, per PitchBook data.

Acquisition activity in the space, meanwhile, is set to fall for the second year running. After hitting a peak in 2015 with roughly $35 billion in total value, this year is on pace for less than $10 billion.

Global M&A activity in fintech

SoFi M&A Talks

If SoFi were to be acquired, the M&A fintech numbers for the year would experience a big boost.

?SoFi already commands a valuation well in excess of the likes of scandal-hit LendingClub (NYSE: LC), the shares of which have plummeted since 2014, when they traded in the $25 range. On Monday, Lending Club's shares were changing hands for just $5.69 apiece, giving it a market cap of roughly $2.3 billion.

An IPO may ultimately be the best option for SoFi, although reports indicate it will probably wait until 2019 to hit the public markets.

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Article by Adam Putz, PitchBook