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DYTTIGAF t1_ja1nrpw wrote

Reply to comment by Dpope32 in Why SoFi is Poised to Take Over the Fintech Industry: An In-Depth Analysis by [deleted]

I hold the stock. The company has to make money. It needs to find leadership that can handle the vision they are pitching.

This isn't an endeavour to product art. It's not a coloring book. Slick ads and impressive graphics belie's the truth that SoFi is sucking up cash. Rising interest rates put this company on the path to bankruptcy...if they do not turn it around.

It's the truth.

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Humble_Increase7503 t1_ja1xyjn wrote

They’re growing at an obscene rate. You can’t just disregard that and then talk about how they’re wasting money on ads and not making money.

I mean, you can, but it begs the question of why you’re in a non profitable growth stock in a high rate environment

And rising rates put them into bankruptcy!?

They have a banking charter, they take advantage of that rising rate environment as well.

And they’re not that far away from being profitable. -40m net income q4 2022, ~-.05 eps. I mean, given their growth, that seems a bit extreme.

Particularly with the CEO buying $7m worth of shares in 1 week in December. Shit he’s been buying a fuck ton of shares tbh. Like tens of millions of dollars worth for months now. Seems strange behavior for a company in the fast lane for bankruptcy.

while stock based comp is to be expected, it remains an irritation. ~$70m in SBC last quarter alone is crazy. That being said, it’s been trending down the past 2 quarters, hopefully that continues.

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DYTTIGAF t1_ja2139i wrote

SoFi debt models (include FICO scores from customers) which will not allow most of their debt to be securitized. That is, sold off (meaning that they will have to warehouse alot of their products themselves). This is not what they want to do. It's not their business models.

It's the same problem Carvana has had over the last year. Resulting in a 90% drop in their stock price and taking them to the brink of bankruptcy.

You cannot run a "financial production" company with the cost of capital increasing by a factor of 5X in under 18 months.

The 30% decline in market value since the beginning of the year reflects this accurate price discovery by investors.

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Humble_Increase7503 t1_ja2fjx7 wrote

It’s up 15%+ since the beginning of the year, unless you meant since the beginning of 2022, to which I say, find me a non profitable growth stock that isn’t down, a lot, since then

Carvana is not a reasonable comparable at all

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SnipahShot t1_ja2m1jw wrote

>while stock based comp is to be expected, it remains an irritation. ~$70m in SBC last quarter alone is crazy.

Not really an irritation, it is insignificant. For one, it is a non cash expense.

And for two, a large portion of that expense is related to PSUs that were awarded after the IPOE process, PSUs with price targets of 25, 35 and 45 (volume weighted average for over 90 days) within 5 years of IPOE. Whether these vest eventually (one or all) doesn't matter one bit, will anyone complain if the stock price is at $45 within the next 2-3 years? Or at $25? If they don't vest then no dilution happens making it pointless.

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SnipahShot t1_ja2li5q wrote

Have you even looked at their fundamentals? Bankruptcy? How do you invest in a company that you don't understand their fundamentals or financial status.

Let's look at how much money SoFi has, shall we?

As of Q3 2022 (10K is not out yet) SoFi had 10,662,995K unpaid principal on their loans. (page 27 of the 10Q)

Out of all of that, 2,314,950K are from warehouse facilities (page 51 of the 10Q).

Out of the remaining, SoFi also had 5,031,630K deposits (page 4 of the 10Q).

After accounting for both, SoFi had $3.3B of their own money in loans (seeing as there are only 3 sources of money to fund loans).

Now, this is just their own money that is in loans.

This is assuming all deposits are used for loans (which they quite possibly are not), this is also ignoring their cash and cash equivalents of $935mil in Q3 which would include their revolving facility money of $486mil.

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Now, for them to actually actually head to bankruptcy they have to spend more than they make. But it doesn't really work that way with GAAP accounting because GAAP accounting counts non cash expenses as well, for example SBC expenses.

From their cash flows and my own spreadsheets, Q3 marked SoFi's first quarter where SBC expense is higher than their actual net loss, meaning they are actually increasing their own cash situation. In Q3 the difference between SBC expense and the net loss was about $3mil, in Q4 that difference increased to $30.9mil (while SBC expense was decreasing from Q2 to Q3 and then to Q4).

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In a later reply I saw you said SoFi has issues selling securitizations, that is plainly wrong.

SoFi literally sold 2 securitizations in the last 4 months (440mil and 340mil) within a day, both receiving AAA ratings from 3 different rating companies. Finsight

The buyers of these securitizations? Bank of America, Cantor Fitzgerald, Goldman Sachs, JPM, US Bancorp, Mizuho, Citigroup and Deutsche Bank. This is on top of them doing whole loan sales because securitizations are less profitable to do. In Q3 they sold $1.08B of loans (value of unpaid principal on them) for which they received $1.1B for (page 35 of the 10Q).

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CBruceNL t1_ja31eki wrote

So...crayon taste good?

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SnipahShot t1_ja3bkz9 wrote

I don't know where or how the stock will move, I only correct people's wrong fundamental understanding of SoFi.

Hopefully it still goes down because I'd love to buy more and I am bearish on the market and assume it would pull SoFi down.

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Dpope32 t1_ja1ocqb wrote

Really need to focus on profit margin going forward, I agree. You’d think being a tech based company they’d find a way to keep costs low. Only time will tell

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DYTTIGAF t1_ja1ph7h wrote

I have "been their and done that"...with one of the largest mortgage companies in the country 2 decades ago.

Technology can only go so far in shaving costs and delivering a "financial product line" to scale. If your models are bad the more you scale...the more money you lose. Ironically.

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smokinjoe569 t1_ja2javl wrote

They are tech based on that they don't have branches but they're still a financial institution. Getting deposits has a cost with it and their loan portfolio isn't really geared towards a higher rate environment.

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