In this conversation, Lex Sokolin and Will Beeson break down important recent fintech news — the SPACs for SoFi and Bakkt, and Plaid/Visa falling apart.
Hi Fintech Futurists,
Welcome to our podcast series!
SoFi is going public with a SPAC deal worth over $8 billion. A few things we touch on in detail: (1) this is still largely a lender, (2) there is a gem of an embedded finance play called Galileo that SoFi owns, and (3) the multiple is a little over 10x T12 revenues, which is not crazy expensive, but not cheap.
Speaking of Galileo and finance APIs, we transition to Plaid, and how it is is not going to be one of the networks in Visa’s network of networks. Who wins and who loses in the equation? And last, we cover the Bakkt SPAC of over $2 billion and our view on its future.
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Lex Sokolin:
If I could hop in to caricature it even a little bit more, as you're saying, 10 years ago, 12 years ago, whenever it was, SoFi is starting to do this arbitrage. They're arbitraging the government's decisions to non-discriminate for student loans, and it's a 400 basis point arbitrage, and they're getting all of the wealthier, better credit students from business schools and law schools to come to them. And if you're running a lending business, all you're doing really is printing money now because you're taking fees upfront and you've got credit risk way, way, way in the back. So on a revenue basis, you look pretty fantastic. So because you look fantastic, you might pick up $500 million or a billion from your friends at SoftBank and all of the other FinTech VCs which are trying to build gigantic consumer brands and are doing it on consumer growth and revenue growth and not really are super worried about credit risk.
Now you fast forward 10 years and the world is in many ways on fire, everybody's bankrupt, money's being printed every which way, and it so happens that your largest investor SoftBank itself is losing 12 billion bucks, printing $10 billion options contracts on tech companies and all sorts of shenanigans. And you start getting calls. You start getting calls from a variety of billionaires, from people that are managing hedge funds and creating these SPAC structures, to the Facebook billionaires like Chamath who are printing SPAC structures, to FinTech billionaires, or near deca-millionaires like The Bancorp's Betsy Cohen. So you start getting these calls saying, "Wow, you have some nice economics, let's go public." I think this is the first fancy one, right? The first fancy FinTech that is going this route. Is that fair to say?