San Francisco-based startup lending company SoFi has struggled over the past few years. Its stock has fallen 93 percent since peaking in December 2017, and the company’s valuation has plummeted from $6 billion to $2.9 billion.
SoFi has faced tough competition from online lenders like Personal Capital and online mortgage brokers like Mortgage Works and Lending Club. And its loans often carry high interest rates and high fees. SoFi has made some changes to try to turn things around. It has continued to expand its presence in new markets and lower its loan costs. But the company’s financial situation seems to be worsening, and it will need to dig even deeper to find solutions.
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What is SoFi?
SoFi is an online lender that provides personal loans and student loans.
While the company was once valued at $6 billion, its current valuation is $2.9 billion. It’s had to make some changes to keep afloat.
The company has expanded into new markets and lowered its loan costs. But it needs to find solutions for its financial situation, which is worsening.
The SoFi story
SoFi is an online lending company that began in 2011 with a focus on student loans. But the company has expanded, and now it also provides mortgages, personal loans, and other financial services. The company has raised more than $2 billion in funding to expand its services.
In the past few years, SoFi has seen major setbacks. Its stock price peaked at $56 per share in December 2017 but has since fallen 93 percent, to just over $5 per share as of this writing. In addition, the company’s valuation has plummeted from $6 billion to $2.9 billion–a loss of nearly 50 percent of its value.
This is largely due to competition from online lenders like Personal Capital and mortgage brokers like MortgageWorks and Lending Club. And SoFi’s loans often carry high interest rates and high fees–much higher than those of its competitors.
SoFi has made some changes to try to turn things around by continuing to expand its presence in new markets and lowering loan costs for some customers. But overall the company’s financial situation seems only to be worsening, and it will need to dig even deeper looking for solutions if it wants a chance at survival.
CEO Mike Cagney steps down
SoFi’s new CEO Mike Cagney has been with the company for over two years and has led the company through some of its most difficult times. But he found it challenging to balance his time between running SoFi and his family. He also didn’t think that he was the company’s best fit at this point in time and said, “I do not believe I am the right person to lead SoFi and so I have resigned as CEO.”
Cagney will stay on board at SoFi as an advisor, but there is no word yet on who will take over as CEO.
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SoFi undergoes a management change
SoFi has been in trouble for a while. In the past year, it has changed CEOs and laid off a significant portion of its staff. It also cut back on marketing expenses. And SoFi is trying to make changes to lower its costs. The company is cutting down its loan portfolio by about 40% and getting out of some businesses that are not profitable, like student lending.
But there have been some signs of hope, too. Loans from SoFi’s online lending platform, SoFi Personal Loans (SLP), have grown by 43%.
There are still many questions about how long these changes will last and if they will be enough to turn things around for the company.
Debt collection and loan origination
One solution is to start a company that will provide loans to SoFi’s customer base.
SoFi has hired John Coogan, the Ex-SoFi CEO and former Yahoo! Chief Financial Officer, to start Blank-check Company. This company will raise $250 Million to give out loans to students, those in financial hardship and others who may need a loan but can’t get one from a bank or other lender. It will also be able to collect its own debts for SoFi.
Coogan said “I believe there is an opportunity for us to provide credit products and services where there are needs that are not being met in the marketplace today. And we think we can use capital from this new enterprise to accelerate our progress on some of these fronts over the coming years.”
Tough financial situation
SoFi has had a tough time recently. The company’s stock has fallen 93 percent since peaking in December 2017, and its valuation has plummeted from $6 billion to $2.9 billion. SoFi is facing some tough competition from other lenders like Personal Capital and Lending Club, which offer loans with lower interest rates and fees.
In addition, SoFi’s loans often come with high rates and high fees. To try to turn things around, the company has continued to expand its presence in new markets while lowering its loan costs. However, SoFi’s financial situation seems to be worsening and the company will need to dig even deeper in order to find solutions.
Looking ahead: A long road back to profitability
SoFi needs to find a way to increase revenue by attracting more customers. It will also need to build its brand and regain the trust of investors. The company will also need to remain profitable for the next few quarters before it can borrow money again.
SoFi is taking steps in that direction, such as launching a new product called SoFi Invest, which will offer fractional shares in companies like Spotify and Lyft. This type of investing is currently popular with millennials and should help bring in much-needed cash from younger people.
If SoFi can turn things around over the next year or so, it could still be a highly profitable company. But for now, things look bleak for one of San Francisco’s most well-known startups.
Read the full post here about the UnityLoan that has faced tough competition from online lenders like Personal Capital and online mortgage brokers like Mortgage Works and Lending Club.