TLDR
- SoFi shares fell 6.1% on Tuesday, closing at $22.74, due to market-wide tech selloff and Fed uncertainty
- Company announced $1.5 billion share offering with Goldman Sachs as underwriter, causing additional dilution concerns
- Stock dropped 8% in premarket trading following the offering announcement
- SoFi posted positive Q2 results with $97.26 million net income and $0.09 earnings per share
- Despite recent decline, stock remains up 60.8% year-to-date and trades near 52-week high of $24.23
SoFi Technologies took a beating on Tuesday as shares tumbled 6.1% to close at $22.74. The fintech company faced a double whammy of market headwinds and company-specific news.
The broader market selloff hit tech stocks hard. Investors pulled money from megacap names like Nvidia, AMD, and Broadcom ahead of the Federal Reserve’s Jackson Hole symposium. The VanEck Semiconductor ETF led the decline as traders locked in profits from the recent AI rally.
SoFi wasn’t immune to this tech rout. But the company had its own challenges to deal with too.
The bigger story came from SoFi’s announcement of a massive $1.5 billion share offering. Goldman Sachs stepped in as the underwriter for this capital raise. The news sent shares plummeting 8% in premarket trading before the regular session even began.
Wall Street doesn’t like dilution, and this offering represents a big one. When companies flood the market with new shares, existing shareholders see their ownership stakes shrink. It’s basic math that often triggers sell-offs.
Financial Performance Provides Some Relief
SoFi’s recent earnings offered a brighter picture. The company posted $97.26 million in net income for the quarter, marking a turnaround from previous losses. Basic earnings per share came in at $0.09.
The balance sheet shows solid fundamentals. Total assets reached $41.1 billion, with a net loan portfolio valued at over $20 billion. The company maintains $6.86 billion in total equity against $3.94 billion in long-term debt.
Revenue growth continues to impress investors when they look past the dilution concerns. SoFi has built a substantial financial services platform that keeps attracting customers.
But numbers only tell part of the story. The market cares just as much about share count as it does about earnings.
Market Volatility Nothing New for SoFi
Tuesday’s drop fits a familiar pattern for SoFi shareholders. The stock has recorded 39 moves greater than 5% over the past year alone. This kind of volatility comes with the territory for growth-focused fintech names.
Despite the recent decline, SoFi stock remains up a hefty 60.8% year-to-date. The shares trade close to their 52-week high of $24.23 reached earlier this month.
Early investors have done well despite the bumps. Anyone who bought $1,000 worth of SoFi shares at the November 2020 IPO would now hold $2,168 worth of stock.
The company plans to use proceeds from the offering for general corporate purposes. That’s corporate speak for having flexibility to invest in growth opportunities as they arise.
SoFi operates in a competitive space where scale matters. The additional capital could help the company expand its product offerings and grab market share.
The timing of the offering coincides with ongoing uncertainty about interest rates. Fintech companies like SoFi benefit from lower rates, which could be coming as the Fed considers policy changes.
The stock closed Tuesday’s session at $22.74, with investors now waiting to see how management deploys the fresh capital.
