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If you have been reading my articles for long, you know that I have covered Sofi Tech before.
I am not exactly a fan of its business model when I realised that it has to take on the loans on its balance sheet. Even the share price chart reflects a lower high each round and the recent attempt to peak wasnt successful and it halted its short term peak at around 22 USD.
In recent days, it has obtained a bank charter. The market was excited to see it with it rebounding from 12 USD to around 16.3 USD. The explanation was that it can reduce its cost of funds. While I am not a banking analyst, I do think that Basel rules may require Sofi to put in more capital as equity reserve to protect the integrity of its institution and protect the retail customers who put money in its system. If so, how would this affect its business? Will Sofi have to raise capital in the short term?
A quick look didnt reveal too much cash on its balance sheet. Also a question to think through is should we start thinking that it is a bank or is it a fintech for its valuation? This is no simple question for me to come with an answer given that I have not undertaken detailed studies on. But if its a bank valuation, the pricing right now is extremely high given that its Price to book is over 2 times.
For a fintech, its pricing also isnt cheap given that its price to sales is so high at over 30x. I think given my risk reward profile, there simply isnt a rush for me to acquire Sofi Tech shares. I will look at it again after its 4Q2021 results or if its share price dip below 8 USD.
As always, this should not be construed as any investment or trading advice.
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