I’d like to address two bear arguments that continue to resurface in regard to SoFi: SoFi’s growth is only from excess capital and the ability to build their balance sheet Their loan portfolio values are inflated. Today I’ll tackle the first one. The second one, which will continue to be a matter of contention no matter how thoroughly it is discussed, but I’ll save that for a future article. Let’s dissect the argument and determine
A great read as always! Thanks Chris. I agree, to me its the member growth that counts. I keep asking my cousins in Chicago and Texas if they have organically heard about SoFi (other than from me and I am Canadian), and they still say that they only know it as a Student Loan company.
I agree with your analysis which is thoughtful and detailed. SOFI‘s problem is that of a fast growing company with incredible earning prospects but treated with no respect when it comes to valuation. I hope you can delve deeper into its valuation conundrum. Specially I hope you can explore a dividend in specie possibility for Galileo/Technisys platform sometime in 2026. SOFI’s only contributes 7.5m out of Galileo’s 140m members which is just above 5% which is quite negligible. If SOFI do a distribution or dividend in specie in 2026 or announce plan for it in 2026 ( and do it in 2027 or 2028) the valuation will fly. If you compound 30% CAGR from 2024-2026 , you get close to $800m tech revenue which is conservative given its pipelines ie many RFPs will become POCs or even actual contracts. For a pure BAAS model with no competition, 15x P/S is conservative and you get a valuation of at least $12b. So, Noto should do what EBay did with PayPal. What I am trying to say is that when Noto requires very good quality milk, he didn’t buy a cow; he bought the entire firm which is selling milk to Chimes, Robinhood Dave etc. He doesn’t need the entire farm. Oppenheimer guy talks about SOTP valuation. Some of the parts valuation is meaningless if the parts are integral to the whole. In this case it’s not. So talking about SOTP, hybrid valuation etc is meaningless. Hive off Galileo and sign a ten year agreement with it. That’s exactly what EBay did with PayPal. My 2 cents worth.
Thanks Chris - this is why the brand awareness drive and holding APY rates higher for longer costs money up front but ultimately attracts members. This aggressive approach is critical in the early years to widen the moat from any other fintechs trying to replicate SoFis business model.
A great read as always! Thanks Chris. I agree, to me its the member growth that counts. I keep asking my cousins in Chicago and Texas if they have organically heard about SoFi (other than from me and I am Canadian), and they still say that they only know it as a Student Loan company.
I agree with your analysis which is thoughtful and detailed. SOFI‘s problem is that of a fast growing company with incredible earning prospects but treated with no respect when it comes to valuation. I hope you can delve deeper into its valuation conundrum. Specially I hope you can explore a dividend in specie possibility for Galileo/Technisys platform sometime in 2026. SOFI’s only contributes 7.5m out of Galileo’s 140m members which is just above 5% which is quite negligible. If SOFI do a distribution or dividend in specie in 2026 or announce plan for it in 2026 ( and do it in 2027 or 2028) the valuation will fly. If you compound 30% CAGR from 2024-2026 , you get close to $800m tech revenue which is conservative given its pipelines ie many RFPs will become POCs or even actual contracts. For a pure BAAS model with no competition, 15x P/S is conservative and you get a valuation of at least $12b. So, Noto should do what EBay did with PayPal. What I am trying to say is that when Noto requires very good quality milk, he didn’t buy a cow; he bought the entire firm which is selling milk to Chimes, Robinhood Dave etc. He doesn’t need the entire farm. Oppenheimer guy talks about SOTP valuation. Some of the parts valuation is meaningless if the parts are integral to the whole. In this case it’s not. So talking about SOTP, hybrid valuation etc is meaningless. Hive off Galileo and sign a ten year agreement with it. That’s exactly what EBay did with PayPal. My 2 cents worth.
Thanks Chris - this is why the brand awareness drive and holding APY rates higher for longer costs money up front but ultimately attracts members. This aggressive approach is critical in the early years to widen the moat from any other fintechs trying to replicate SoFis business model.