Chasing ambitions: SoFi elevates its game by participating in underwriting the Instacart IPO

Chasing ambitions: SoFi elevates its game by participating in underwriting the Instacart IPO

In a move to take the reins as a full-service FI, SoFi has stepped forward as one of the underwriters for the Instacart IPO.

by SARA KHAIRI

The global IPO market turned from a boom in 2021 to dust by the end of 2022. The first half of 2023 saw IPOs raise $10.1 billion via 63 deals, demonstrating growth of 115% and 24% from last year, which has fired up some excitement around public market investing and a cluster of companies waiting to hit the market for new opportunities and growth.

One of the most anticipated US IPOs this year includes the grocery delivery app, Instacart, slated for next week. In a move to take the reins as a full-service financial institution, SoFi has shimmied its way in as one of the 20 banks underwriting the Instacart IPO, led by Goldman Sachs and JPMorgan Chase.

This can be a big shot for SoFi, which went public in 2021 and is best known for student loan refinancing. It can be equally daunting. On the road to becoming a fully-fledged bank, the firm acquired a banking charter beginning last year. Since then, CEO Anthony Noto has been brewing ambitions involving IPO participation, citing "We won’t stop until we’re one of the top 10 financial institutions in the country" -- alluding to some very big shoes to fill.

Now with the IPO market showing signs of life, SoFi stands a chance of exercising its ambitions. Still, it might be a long and rocky road ahead for the firm to make a name for itself and break into a fiercely competitive market dominated by Wall Street incumbent banks. The good news is that while SoFi may lack sufficient experience in underwriting IPOs with only five deals since March 2021, quite the opposite holds true for its CEO. Noto has years of experience dealing with IPOs and earlier helped oversee Twitter’s IPO in 2013 as co-head of the telecom and media investment banking group at Goldman Sachs.

Wall Street's sentiments about SOFI stock

The Instacart IPO underwriting opportunity might also bring clarity around SoFi's path to profitability, which has been a subject of concern for analysts in the past quarters.

Last month SoFi reported some encouraging figures in its second-quarter financial results. While the numbers looked impressive, analysts still had reservations about the firm's future trajectory and long-term profitability. Profitability has been a persistent challenge facing SoFi, with deposit relationships costing the firm money and eating into its profit margin.

SoFi hinted at the prospects of profitability by the last quarter of 2023 in its recent quarterly earnings conference. The window of opportunity is apparently ripe for the company to make the most of the big IPO that can kick in profits through lucrative IPO fees while fortifying its reputation.

Shares of SoFi surged on Tuesday and closed at $9.00, the highest in a month.

Market recap

Wall Street banks added modest gains to the IPO Index last week

Goldman Sachs (GS) - up 7% to $344.57 per share

• Goldman Sachs stock jumped after the investment bank said it would resume annual performance reviews for underperformers, which could result in 1% to 5% of employees being dismissed.
• Goldman Sachs is the lead underwriter in the Arm IPO. The bank is also the lead underwriter along with JPMorgan Chase for the Instacart IPO slated for next week.

Wells Fargo (WFC) - up 6% to $43.05 per share

• Wells Fargo outperformed the consensus estimates in the second quarter of 2023, with total revenues increasing by 20% YoY to $20.53 billion.
• Moving ahead, analysts maintain a positive stock sentiment and expect the same trend to continue in Q3 2023. WFC’s adjusted net income margin is expected to improve in the year, leading to an adjusted net income of $17.6 billion.

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