From Frankel: Upstart is trying to become a financial technology company that partners with banks and just to help them do their existing business better. [laughs] Well, Matt, before we wrap things up here, we normally like to wrap our shows up with ones to watch for our listeners. A lot of other lenders, SoFi, which we're about to talk about in a few minutes, follows a non-traditional lending model, but also wants to pursue generally high credit borrowers. [laughs] You've got it figured out. Frankel: The brief overview is a SPAC which stands for special purpose acquisition company. I think it's down somewhere in the neighborhood of about 20% a year. Moser: Well, that sounds very good, Matt. There are three arguments that I often hear in favor of bitcoin. As always, people on the program may have interest in the stocks they talk about and The Motley Fool may have formal recommendations for or against, so don't buy your or sell stocks based solely on what you hear. Frankel: I wish I still had them. You gave it the old Ricky Bobby. That's --. Frankel: So far, to my knowledge, Upstart has no desire to become a bank. No. Over the past 24 hours alone, it's down about 18%. The idea is that it simplies the traditional process of IPOs, the IPO roadshow, the need to hire new underwriters, things like that. We’ve educated thousands of people to get access to Pre IPO Stock Opportunities. The new CEO, Charlie Scharf, has prioritized expense reduction, saying he wants to cut I think $10 billion of expenses off the bank. Frankel: There's a reason that there's over $100 billion in the second largest cryptocurrency. I mean, I think we've seen some adjustments to the FICO score in order to make it a little bit more modern, and account for today's consumer. They make personal loans of up to $50,000, they've made over 600,000 loans so far. But they rested on their laurels, and Xoom got in there, and essentially started using artificial intelligence, and data points, and automation in order to make this an easier experience. But for the time being, it's not a stored value. It's a volatile asset. There was still some stimulus being pumped into the market. The new one, SoFi, it's been agreed upon, so it's going public under a SPAC that you can buy on the market right now. Joining me this week, it's my man, [laughs] Certified Financial Planner, Matt Frankel. Okay, so let me give you one statistic. That's a group that historically banks have not been very easy to deal with. You can spend bitcoin at about 2,300 merchants right now. I understand how it works. But it just showed me really even back then, the power of using that data in order to assess risk better. Frankel: That's not a lot of penetration into the market. Upstart is a personal lender, that's pretty much what business they're involved in right now. It's an interesting business model. I'm not saying it's not special. They claim there are millions of potential borrowers that are creditworthy, but not by traditional FICO scores, and other bank metrics. Remittances aren't anything new. Cumulative Growth of a $10,000 Investment in Stock Advisor, 2 Fintech IPOs to Watch @themotleyfool #stocks $UPST $BAC $GOOGL $WFC $WU $GOOG $LC $PYPL $SQ $ZM $SPCE $DKNG $NKLA $IPOD.U $IPOF.U $OPEN $IPOD $IPOE $CLOV, Copyright, Trademark and Patent Information. We've talked about it here in there, a company called Xoom, X-O-O-M, not Zoom Video, but X-O-O-M, which is a financial remittance company that PayPal ultimately acquired. Frankel: I thought you were about to give out my address or something. Frankel: My savings account is a stored value because its value doesn't fluctuate. I actually mined about 12 coins in total back in the 2012-2013 time frame. It was a little better as listeners probably know. If you can make your own loans and not go through an intermediary, that's one less person you have to pay, so it can save money. There's data there that shows more and more consumers, particularly even younger consumers, really are trusting of a lot of these tech companies that partner with financial service providers in order to ultimately get done whatever they need to get done. They operate in the grey area of companies that are not institutions themselves but offer institutional services, like Lendingtree. For one, forget about the scarcity thing where you can't make more gold, but potentially there could be more bitcoin made. Focusing on what I do. I don't buy the use case for bitcoin. I've mined bitcoin, I've used bitcoin, I lived off bitcoin for a day just to see if it was possible. They applied for and received conditional approval, like you said, in October, they got conditional approval for a bank charter. This is unusual, as retail investors typically don’t get allocated pre-IPO shares, and instead must get into markets on the first-day trading rush (at inflated prices). But what is SoFi (Not to be confused with “Sophie” a popular toy dog name) ? Upstart gets referral fees. SoFi is a finance company that offers a range of lending and wealth management services. And last but not least, we discuss the recent correction in bitcoin and other cryptocurrencies, and why Matt and Jason aren't likely to buy bitcoin anytime soon. The company primarily caters to early-stage professionals and offers variable and fixed rate parent, personal, and MBA loans, mortgage refinancing, and more. The ticker symbol is IPOE, it's one of Chamath's SPACs. I am your host, Jason Moser, and on this week's financial show, we're going to dig a little bit more into a brand new IPO out there in Upstart Holdings. SoFi will go public via a SPAC … Like you said, they started as a community-based student lender, refinancing loans, issuing private student loans, they branched out into mortgages. Based in San Francisco, SoFi provides … I want to see how that's playing out. Moser: Yeah, I've never been self employed, but I worked at Bank of America for a couple of years, and I was a loan officer there. Upstart's not a bank itself like a lot of these fintechs. [laughs] But I got to believe the biggest risk, it's not just valuation, it's got to maintain its growth, and there's a huge element of competition risk in this space. It goes public, raises usually a few $100 million, then it seeks an acquisition target. I get why they see a big use case at it, I really do. Why don't you elaborate a little bit for us? That's why we're seeing this giant wave of SPAC IPOs. In this week's Industry Focus: Financials, Fool.com contributor Matt Frankel, CFP, and host Jason Moser discuss what Upstart does and why investors are so excited. That sounds impressive, right? That acquisition target gets that few $100 million plus some extra capital infusion, and in exchange, they combine these businesses, go public, under the SPACs, already a public entity. But I just don't see the mainstream case for it at this point. They have a robo-advisor, there's an insurance division that partners with other insurance companies to offer products to their members. That's something they have to upkeep, obviously, that comes with responsibilities, and regulations, and ratios, and requirements. The company right now has just under a $4 billion market cap. Their revenue grew 44% in 2020, which I wouldn't expect a lender to grow that much in 2020. I've mined bitcoin. Then there's a sixth one, IPOF, which is the largest one so far. I think it's a testament to the power of all of those data points that you were talking about. That's why. Frankel: I understand the concept. Stock Advisor launched in February of 2002. This is why people, I think it was Venezuela that had a hyperinflation if I'm not mistaken. Technology then wasn't where it is today, so I can imagine that it really resonates with that younger consumer. This is a company, one of the co-founders, David Gerard, who's the CEO of the business and co-founder, owns I think somewhere in the neighborhood of 16% of the shares. Man, all due respect. Frankel: On a similar note, that age group you were just referring to, a lot of them skewed toward being self employed, myself included. They just paid $1.2 billion to acquire it. There's three main arguments that I always hear when people tell me I should own bitcoin. I understand the utility of it. They take many factors – including your level of interest – into consideration before setting an IPO (or Pre-IPO) … It's because the valuation is lower than a lot of people thought so far it would end up going public for. For one reason, may people now trading from home will simply get addicted to the habit of what many day traders have known for years. Then it will be interesting to see how the Robinhood traders ebb and flow the market cap of their own trading platform, in real time. The initial public offering (IPO) market overcame a lightning-quick bear market in 2020 to bounce back to levels not seen since the dot-com boom. They're targeting the overlooked consumers by traditional banks. JUST is a Pre IPO food company Non GMO disrupting the food industry. It's been around for a little while, and it's interesting to see how these businesses evolved because it really started out as an alumni funded lending model that ultimately it was just helping students and graduates deal with student loans. These are two very similar businesses, so I'm going to be interested to get your take on then both. Moser: SoFi is popular. Bitcoin hit over $40,000 dollars a coin last week, and has since pulled back a little bit. There's nothing wrong with that at all. Greetings, Wishing all of our readers a very happy and healthy new year! But as you mentioned, that can be a real source of capital, which is their business. SoFi is FinTech but it’s not just technology – they offer actionable items so the actual feel is as if you are opening an account with SoFi. This should not be confused with SoFi… While many have never heard of Social Finance or SoFi, it’s valued at $8 Billion USD which puts it not exactly at the bottom of the list. It's not really what we cover here, but by the same token, we've seen bitcoin pull back considerably here over the last 24 hours. A full transcript follows the video. I mean, a majority consensus is why we have things like bitcoin cash, the offshoot cryptocurrency. I'm not saying there is not a use case. SoFi IPO SoFi is a finance company offering a range of lending and wealth management services. They partner with banks. Another company that we talked about on this show before, and a firm, I think John Maxfield and I did show a little while back when we went through a firm's S-1, and there was just an interesting data point in there that really spoke to how consumers view the state of finance today. Not earning, it's 20 times sales. Day trading is the ultimate hobby which can actually pay your bills, as opposed to things like “Second Life” which can actually ruin your “real life” that is IRL, lol .. As more participants come to the market, more players will emerge and the unfair practices of Robinhood will be kept in check. It's not just lip service, it really does work. It made sense. And of course, soon Robinhood itself will go public, now only being offered in the pre ipo markets. It's not a no-risk investment and it's really priced for a lot to go right in the next couple of years. At the present moment, it is possible to invest in SoFi … ... Sofi. Like I mentioned in other posts, some platforms allow investors to invest in pre-IPO companies. It's a $1 billion-dollar SPAC that is still looking for its acquisition target. Upstart is a company that just IPOed, I believe in December, so this is brand new to the public markets. Personal-lending technology company Upstart (NASDAQ:UPST) went public a month ago, and its stock has nearly doubled since. According to our review on our personal finance page, Upstart loans with as low as a 580 FICO score, which is well into the poor credit range. They are growing pretty impressively. I mean, the scarcity argument, I don't totally buy. If someone else comes along and there's no shortage of alternative lenders in the market these days, that space is really blown up. The things I'm watching are the default rate. I think that with any of these types of businesses, particularly in this current market, the way IPOs have been received, at least in the near-term valuation, has to be at least a concern. Recently, Zero Hedge broke the story on how SoftBank has been a major participant in the options market. A banking charter really makes sense for them. As the name implies, the special type of company [laughs] that it's formed for one reason, to acquire a private business and take it public. Frankel: But I am in the self-employed group. We're going to get the fourth quarter earnings. Frankel: That's why people were storing value in that currency, because it was very volatile and unpredictable at that point. I want to see any progress on that. I mean, you could say that inflation over time will fluctuate, but not by 20% in a day. That's the brief overview of how SPAC works. Frankel: That's not going to prevent a Reddit thread from popping up. Maybe it is. Moser: [laughs] Yeah, it seems that way every week for you. I think we've homed in on one there in artificial intelligence, and using data to make decisions. I just leave it at that. I don't see the use case that's going to appeal to main street. What does Upstart do? PDF Filescandals  , and their general unhappiness with the banking status quo  . Zero Hedge broke the story on how SoftBank has been a major participant in the options market. Let's talk a little bit about what the advantages of this business really are. SoFi IPO. https://www.fool.com/investing/2021/01/15/2-fintech-ipos-to-watch Unlike their parents, Millennial don’t have faith in traditional financial services, due in part to the financial crisis of 2008, a deluge of  . I want to see any commentary toward when that might start to happen and to what extent. Then that's a big competitive advantage all by itself. Moser: Remember, as always, you can reach out to us on Twitter at @MFIndustryFocus. Because that was an advantage that Xoom really built out, in building their risk model was ultimately building out these data points, that help them assess risks far better than these traditional players in that remittance space. How do they make their money? You have some opinions on the matter. We’re stewarding a richer future for all by building private market product & service solutions to help fuel a thriving innovation economy. Also, a private company is not generally required to disclose financial or business information to the public. That's pretty impressive. [laughs] That's OK, don't worry, we still own PayPal, so we got part of it there. To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. That's a market that this non-traditional credit model, by companies like Upstart, can really help solve. DraftKings was a big one last year, Nikola was a SPAC IPO, Opendoor was a very recent SPAC IPO. It's been pretty well known. Right now, I guess, their biggest competitive advantages are proprietary technology. It's really gone beyond just banks, and it's more about tech companies partnering with banks. That seems to be the case. That could be a big part of the story, just the increased technology umbrella that they have. With contactless payments I can pay by just tapping my phone on something. In banking, we've been so used to that stereotypical, stodgy, big bank environment. Because of their over 1,000 data points, they are willing to look at consumers that have lower credit scores in a lot of other personal lenders. But it still sounds pretty reasonable when you consider what some of these other fin techs are trading for, considering just the wide scope of what they do. But one that I think a lot of folks were excited to see go public, because it's another one of those companies that's really helping reshape the space of finance, and in particular lending. I don't need actual U.S. dollars to pay in U.S. dollars anymore. It's not a surprise that the shares of the stock took off after this announcement. But [laughs] SoFi does have a big mortgage operation. SoFi, including $2.4 billion of new capital, is about $8.65 billion. An IPO is when a company’s shares trade on a public market for the first time. What else stands out to you about this business that makes it special? Ultimately, what it resulted in, Xoom was really taking a lot of share, PayPal saw that, jumped in there, made the acquisition before they got too big. I know money is not the biggest motivating factor for everybody, but you got to think it's there. For example, did you know that having a college degree is an indicator of better loan performance? Matt is a Certified Financial Planner based in South Carolina who has been writing for The Motley Fool since 2012. In April 2019, SoFi CEO Anthony Noto stated in an interview with Yahoo! For Matt Frankel, I'm Jason Moser. [laughs] Maybe that's a little bitterness coming through. Listen, man, I appreciate you taking the time to jump on as always. I mentioned that Upstart has done a little over 600,000 loans in its history, SoFi has 1.8 million members and all of these other products. Frankel: If you just look at businesses that have at least one employee, there are seven million small businesses in America. Frankel: Now you're going to make me be the bad guy again. Moser: Well, Matt, speaking of fintech and banking of the future and all that jazz, we've seen over the past 24 hours, we don't get into bitcoin very often on this show. But there's still a laundry list of upcoming … I mean, you could make the argument that PayPal and Square are onboard with bitcoin and PayPal has said that it wants to make bitcoin usable at its merchants. I'm with you. Moser: [laughs] Money makes people do a lot of things. At the same time, the rise of the digital economy is offering ,millennials other options. BEFORE VIEWING ITS CONTENTS YOU MUST SELF-CERTIFY YOURSELF AS AN ACCREDITED INVESTOR. Many are okay with a branchless, fully digital financial partner like SoFi, and would consider putting their money into non-financial service companies they already use regularly, such as Square or PayPal. Moser: Yeah. A high-level overview of Social Finance (SOFI) stock. SoFi has a lot of operations. Just for our listeners, give us a quick primer there on SPACs. They are connectors, they connect banks with customers that they otherwise wouldn't connect with. I don't care. The financial landscape is changing. It was a really fun conversation. Xoom was a company, I think it was really a little bit ahead of its time almost, in that it was at the forefront of this AI powered finance model. If approved, they're going to be a bank. Someone has a mediocre credit score, but they just got out of college, that's something they would consider in their algorithm. This week, because banks are getting ready to kick off earnings season on Friday, we wanted to just go ahead and get your take on a couple of things you are watching here for banks this coming earnings season. They raised all this money, the company has no operations other than having this giant bank account with money, and they're using it to take SoFi, which is a popular financial company, public. PreIPOSwap.com 1/9/2021 — New York, NY — With the news of another Pre IPO company going public via SPAC (SoFi) investors are … Open a commission free trading account at www.levelx.com – Level the playing field, Accredited investors can open a Pre IPO investment account at https://www.levelx.com/pre-ipo. Companies like Upstart are really changing that model around. If bitcoin got to that level of stability, I might buy the stored value argument a little bit more. Frankel: It's a fee income business model. Sign up today to learn more about SoFi stock. A SPAC goes public, it has no business operations when it goes public. EquityZen is a marketplace for shares of proven pre IPO tech companies. Moser: Yeah, I agree. Or you can drop us an email at MFindustryfocus@fool.com. sofi.com | FinTech | Founded: 2011 | Funding to Date: $3.28B. Most importantly, SoFi is not actually a bank or financial institution. ... Social Finance (SoFi… There's no doubt about it. Because of this it is highly risky, as organizations do not have … The stored value I think I don't really buy at the moment. Another name for SPAC is a "blank check company." If someone else figures out how to address that market equally well or better, then you could see a lot of competition risks. This trend looks likely to continue to grow. A powerful ecosystem of innovators and … That's a big cost of capital advantage for a lender. But even then, I was just astounded at how difficult it was, and you could see the frustration from the clients when they came in, and you had to call them back in, and we had to call for more documentation, and needed another signature. I think you make a lot of good points there and I'm sure there are folks out there who would take the other side of the coin, so to speak. Who do you think was mostly on the other side of those trades? Frankel: That's a big motivation. Moser: Yeah. They do student loan refinancing for example, but are not a lender themselves. To put it another way, if an existing shareholder wants to sell some of their shares, they … Here are a few reasons. Lots of news to kick off 2021 – SoFi looking to go public via SPAC; OCC’s groundbreaking guidelines on … One thing that really surprised me about this SPAC deal is that the valuation really doesn't seem that insane. Social Finance, Inc. is an American online personal finance company. I mean, I'm not interested in that.[laughs]. When I mentioned Upstart, which is just a personal lender, just 600,000 loans, that's impressive, but comparatively, it's small. Frankel: Bitcoin's been around for a decade now. I know that you had a great conversation, not all that long ago with Dan Caplinger and you had gone over some of the basics here in regard to SPACs and how they work. Video was recorded on Jan. 11 mined bitcoin, this volatility first makes tell! 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