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2022-02-22 17:55

SoFi Technologies Inc closed down about 10% on Tuesday after the personal finance company said it will buy the privately-held digital banking platform, Technisys, for $1.10 billion.

Details of the agreement
Shareholders of Technisys will get roughly 84 million shares of SoFi common stock in total. This represents less than 10% of SoFi's fully diluted share count as of September 30, 20211, pursuant to the Acquisition Agreement's usual modifications. The deal is projected to occur in the second quarter of 2022, if all closing terms are fulfilled.

Commenting on the acquisition, the CEO of SoFi Anthony Noto said:

"Technisys has built an attractive, fast-growth business with a unique and critical strategic technology that all leading financial services companies will need in order to keep pace with digital innovation. The acquisition of Technisys is an essential building block in delivering on our member-centric, digital one-stop-shop experience for SoFi members and our partners through Galileo, our provider of fintech cloud services."

SoFi's fast revenue growth rate will be boosted by the merger, which will increase its three-year revenue CAGR. SoFi also hopes to use this cutting-edge technological stack to save money on third-party expenditures by integrating Technisys.

What’s in it for SoFi Technologies?
SoFi intends to be able to develop even quicker, do more real-time decisioning, and offer better personalization for its more than three million users after it has transitioned off its current various third-party cores to a single owned and controlled Technisys core. SoFi forecasts that this change and the vertical integration with Galileo will save $75 to $85 million in total costs between 2023 and 2025, and $60 to $70 million annually after that.

On an unaudited IFRS basis, Technisys' sales growth is increasing, and the company is on target to generate roughly $70 million in sales in calendar year 2021. However on a standalone basis, the purchase is estimated to generate a mid-teens internal rate of return (IRR) for SoFi through 2025, with potential upside in the IRR when revenue and expense synergies are taken into consideration.

Following the merger, Technisys will function as a separate subsidiary of SoFi Technologies, as part of its Technology Platform offering, with Miguel Santos remaining as CEO.

SoFi to report quarterly results next week
SoFi expects to reveal its fourth quarter and fiscal year 2021 earnings after the closure of the financial markets on Tuesday, March 1, 2022, as stated on January 24, 2022. For the fourth quarter and full year of 2021, management maintains its previously disclosed financial expectations.

The California-based company is down more than 35% in the stock market this year. It’s shares have more than halved since early November 2021.