A $2 billion financing deal has investors excited.
Shares of SoFi Technologies (SOFI 10.75%) jumped as much as 10.5% in early trading Monday after the company announced a $2 billion personal-loan financing deal. The stock pulled back slightly but was still up 9.3% as of 12:30 p.m. ET today.
The $2 billion boost for SoFi stock
Fortress Investment Group agreed to provide $2 billion in financing for the platform for personal loans. SoFi CEO Anthony Noto said this would help his company “serve the financial needs of more members and diversify toward less capital-intensive and more fee-based sources of revenue.”
As it stands, SoFi finances most of its loans through cash, debt, and deposits on its balance sheet, just like a normal bank would. But the company wants to provide loans as a service to SoFi users without taking on the financial risks involved in being in the loan business. A great way to do that is to have a financial partner take the risk, in this case Fortress, while SoFi just takes a fee for facilitating the loan.
SoFi’s asset-light future
The platform and financial services businesses SoFi has built are relatively capital-light, and that allows for high growth and high margins. The lending business hasn’t had the same characteristics, but deals like this could change that.
An increasing number of finance partners could allow the company to grow personal loans, student loans, home loans, credit card balances, and even margin loans. This could just be the start of unlocking even more of SoFi’s potential.
Travis Hoium has positions in SoFi Technologies. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.