News & Analysis

driven by the PitchBook Platform
Venture Capital

SoFi sought $8B valuation in failed M&A talks

Fintech startup SoFi reportedly mulled a potential sale earlier this year, but the talks with Charles Schwab and others evaporated over the hefty asking price.

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.

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.

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.

Not a subscriber to our daily M&A newsletter? Sign up today!

  • adam-headshot-15-kbh-637x518.jpg
    Written by Adam Putz

    Adam writes about M&A at PitchBook. Originally from Minnesota, Adam studied philosophy and journalism before earning a PhD in English from the University of Warwick. He is the author of The Celtic Revival in Shakespeare’s Wake (Palgrave Macmillan, 2013). When he’s not covering the latest deal or financial news out of Europe, Adam likes to write about environmental issues. In his free time, Adam enjoys hiking and canoeing, reading and traveling.

Join the more than 1.5 million industry professionals who get our daily newsletter!