BankTechDealmaking

Golden Pacific acquisition won’t interfere with SoFi’s public offering plans

SoFi is on pace to go public in the next few weeks via a merger with a SPAC backed by Chamath Palihapitiya

SoFi, the Bay Area-based fintech which offers banking, investing and lending solutions is on pace to go public in the next few weeks, a company spokesperson told FinLedger. The company in January announced it would go public through a merger with a special-purpose acquisition company (SPAC) backed by investor Chamath Palihapitiya.

SoFi last week announced it was acquiring Golden Pacific Bancorp, a three-branch community bank with $150 million in assets, for $22.3 million. The company expects the deal to close by the end of the year, which won’t have an impact on its plans to go public via SPAC, the company said.

SoFi, which applied for a national bank charter with the Office of the Comptroller of the Currency in July, received conditional approval in October. The company said it would swap the de novo application for a change in control one, and still intends to go to the Federal Reserve for final approval as planned. With the acquisition, the company hopes to secure approval within a quicker time frame, given that a de novo application could take years to process. But either way, the company reinforced that the charter application won’t impact Sofi’s public offering plans of timeline.

Thomas Hoenig, distinguished senior fellow at the Mercatus Center at George Mason University and a former vice chairman of the Federal Deposit Insurance Corporation, suggested SoFi could gain speed and time efficiencies from going to the Fed for permission to acquire a bank rather than start a bank anew through the de novo process.

“They would be better positioned to go to the Fed for permission to acquire a bank, which would probably save them time, startup cost and energy,” he said. “When they acquire this bank, they will have their clearing account and they’ll have the operation people at the bank.”

Other hurdles to getting a bank set up through the de novo route include finding locations and encouraging customers to make deposits, he added. Upon closure of the transaction, Golden Pacific Bancorp would operate as a subsidiary of SoFi. 

SoFi, according to a recent investor deck related to the public offering, has 3 million customers (called members). It pins its growth prospects on capabilities to grow multi-product relationships. The company’s number of multi-product customers stood at nearly 400,000 at the end of last year – a jump more than three times year over year.

Much like SoFi, a growing number of fintechs are seeking to obtain bank charters. Square’s industrial bank Square Financial Services began operations earlier this month. In February, payments and financial services startup Brex applied for a banking charter. Meanwhile, Varo, after a grueling three-year process, obtained a national bank charter in July.

With an upswing in the number of fintechs that want to become banks, Hoenig argues that the Biden administration needs to determine whether the value of an increasing number of nonbanks entering the banking sphere will outweigh the costs.

“The issue is growing in importance as the number of nonbanks wishing to become banks continues to rise,” he said, in a recent report. “Leaving the matter unresolved would create a chaotic environment as nonbanks push to join the market and the government is forced to take an uneven regulatory approach to overseeing the different players.”

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