SoFi CEO Pins Share Drop to Run-Up Before Third-Quarter Results

SoFi Technologies Inc. shares fell after a profit forecast and third-quarter earnings beat weren’t strong enough to extend a rally that had propelled the shares 40% higher in less than a month. 

“I think we’re seeing some of that being taken off the table,” Chief Executive Officer Anthony Noto said in an interview on Bloomberg TV Tuesday.

The stock dropped as much as 13%, the biggest intraday decline since March, before paring that slide to about 7.2% at 12:13 p.m. in New York. 

Adding to the bearish tone was speculation that SoFi might struggle to grow due to capital concerns. Noto said in the interview that the company is “not focused on capital raises,” nor is it concentrating on acquisitions. 

“We don’t need to grow the balance sheet faster than it’s been growing,” the CEO said. 

Mizuho Securities analysts led by Dan Dolev echoed that idea. “We believe the bears are confused,” the analysts said in a note. “We reiterate our belief any worries about capital raise are unmerited.”

SoFi raised its forecast for this year’s earnings per share to 11 cents to 12 cents. 

The higher profit guidance reflects benefits from the fintech’s efforts to diversify beyond the student-lending business that made its name. It also raised its guidance for adjusted net revenue to $2.535 billion to $2.55 billion, up from an earlier range of $2.425 billion and $2.465 billion, it said in a statement Tuesday.

The San Francisco-based company reported record adjusted net revenue of $689 million for the third quarter, fueled by a 64% jump in financial services and tech platform segments, or its non-lending businesses. Fee-based revenue of $174 million for the period accounted for about a quarter of its adjusted net revenue, it said. 

Noto has expanded the company beyond student-lending into a financial services one-stop shop, with savings, investing, lending and other offerings. He’s seeking to build a more diversified, less capital-intensive business and secured a bank charter in 2022.

SoFi announced earlier this month an agreement to use $2 billion of Fortress Investment Group’s funds to originate personal loans, sending shares rising at the time. While not an uncommon relationship for financial-technology companies, the sum was noteworthy for the loan-platform business SoFi aims to build out.

The company said its loan-platform business also posted record results, fueled by $1 billion of personal loan volume for third parties, it said. Net income was $60.7 million for the period, according to the statement.

With assistance from Ed Ludlow and Caroline Hyde.

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