SoFi customers can now invest in PSPCs
which became public by merging with an ad hoc acquisition company, gives individual investors the possibility of investing in after-sales services.
Starting Wednesday, SoFi (ticker: SOFI), the online personal finance company, will allow clients to purchase shares of four biotech SPACs – Social Capital Suvretta Holdings Corp I, II, III and IV – from the capital- risky Chamath Palihapitiya.
(MS) and SoFi are listed as underwriters on the four blank check companies, which have not yet been made public. SoFi customers can buy up to 5% of the shares in each transaction, says a flyer.
“This is one of the first initial public offerings to be included on the SoFi platform and there may be risks associated with using the SoFi platform that we cannot predict,” said declared PSPCs in regulatory documents.
SoFi investors can buy shares in PSPCs for $ 10 each, before the blank check companies go public. To invest, SoFi clients need an Active Invest account, and they must have a minimum of $ 3,000 spread across SoFi Invest accounts, according to the company site.
SPACs typically have two years to find a target, which means investors can wait a long time to get their money back. If the blank check company does not find a merger partner during this time, the shareholders will get their money. without interest, said a person familiar with the situation.
SoFi is the latest company to give retail investors access to lucrative IPOs. In May, Robinhood Markets began offering new issue stocks to retail investors. Robinhood clients were able to purchase shares in
(FIGS), the Santa Monica, Calif., Company that sells trendy medical scrubs, before it began operations. FIGS shares rose 36% when it debuted in the market last month.
By investing in SPACs, SoFi gives retail investors the opportunity to invest in one of the most active sectors of the IPO market. More than 330 blank check companies have gone public this year, Dealogic said. About 422 blank check companies are currently looking for deals, according to SASP research. Another 150 PSPCs have announced deals but have yet to complete their mergers.
SoFi’s offering may seem lucrative, but it’s unclear what the benefits are for investors. SPACs generally price their transactions at $ 10 per share. In January and February, at the height of the PSPC euphoria, blank check companies typically jumped 5% to 6% when they first entered the market, said Jay Ritter, a professor at the University of Florida who studies IPOs. It’s changed. PSPCs are now trading at around $ 10 plus or minus a few cents, he said.
“The ability to buy at $ 10 doesn’t seem like a phenomenal opportunity,” Ritter said. Over the past eight months, Ritter said he bought shares of several SPACs in the secondary market, usually at around $ 10.
When SPACs go public, they typically sell $ 10 units made up of a common share and a fraction of a warrant (essentially a call option) which split up and begin to trade separately a few months after the start. ‘Initial Public Offering. Warrants are seen as a sweetener for IPO investors in exchange for tying up their cash as sponsors seek a target. They can usually be exercised at $ 11.50 once the combination is over and offer upside potential, Ritter said. SoFi customers who buy shares in PSPCs will get the warrants, the person said.
However, Social Capital’s four biotech SPACs do not include mandates, according to regulatory documents. Some sponsors have also chosen to remove the SAVS mandates after the Securities and Exchange Commission said in April that they should be treated as liabilities and not equity, the person said.
Social Capital is the venture capital firm of Palihapitiya, a former Facebook (FB) executive. Palihapitiya used PSPCs to buy several companies, including
Clover Health Investments
(CLOV), a predominantly digital Medicare Advantage insurer,
Virgin Galactic Holdings,
Open Door Technologies
(OPEN) in addition to SoFi. SoFi merged with Social Capital Hedosophia Holdings V in an $ 8.65 billion deal earlier this year. It started trading on June 1.
In addition to PSPCs, SoFi plans to let its clients pick up shares from traditional IPOs and direct listings, the person said. SoFi customers will also have the option to purchase shares in LTV Capital Partners I, Jeffrey Housenbold’s blank check company,
a former SoftBank executive. LTV Capital Partners I is not yet available, the person said.
SoFi has a rollover policy. While it does not limit the sale of IPO shares in the secondary market, SoFi does not want clients to sell their shares too quickly. Clients who sell their IPO shares within 120 days of the IPO will be charged a fee of $ 50 the first time they return, according to the prospectus. He will charge a fee of $ 5 for any subsequent quick sales.
Write to Luisa Beltran at [email protected]