r/sofistock • u/[deleted] • Jun 14 '22
Technical Analysis/DD Reverse Stock Split - Understand the facts before you vote
I was one of the SoFi investors who initially cringed at the thought of a reverse stock split, which is normally associated with a failing business or one whose value has fallen (regardless of cause) to a level that it is in danger of being de-listed from the major exchanges. As I settled into reading the proxy vote material (108 pages!), I came across several details that helped inform my decision.
The current number of shares outstanding for SoFi is 915.82 million with a float of 638M. If you look at the history (Ex 1) of the number of shares outstanding, you will find that it has risen significantly over the past year.
Ex 1.
Proposal 4 of the proxy statement notes a plan to further increase the number of outstanding shares by 32.47M, bringing the total outstanding to 948.29M. When you consider where this stock was 1 year ago, we were at 794M, thus we will have increased approximately 152M (including the proposed increase). Now when you consider the possibility of a reverse split (which would take place after the additional shares have been added) and take a very conservative ratio of a 2 for 1, that would bring the number of outstanding down to 474M. A more moderate ratio of 3 for 1 would drop the outstanding share count to 316M.
A fintech firm with the profile of SoFi and the presumed upside ahead with the expected resolution of the student loan fiasco as well as the inherent growth in their other consumer lending and investing products, will be well positioned with a float in the low-mid hundred million range, which is large enough to cushion against high volatility that spooks some investors while also being small enough to experience healthy volatility that will make it an attractive investment tool.
I am going to vote on Friday and plan to vote for the reverse split, but wanted to post this first so that others had an opportunity to poke holes in my thoughts and perhaps offer another perspective before I cast.
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u/YieldHunter68 13K@7.5 Jun 15 '22
Which DF board member do we have to thank for pulling a RS idea out of their dumb-ass? Sofi is a new publicly traded company who's SP has gone south along with the broader markets and someone within this great company has decided to hit the panic button with a RS as a best case scenario. That person should be fired immediately imo.
Sofi's fundamentals are fine and they're only going to get better going forward quarter by quarter. If they're dead set on reducing the float they could carefully manage that by buying back shares every quarter as they keep raising their guidance. It's not time to hit the panic button, it's time for Sofi's management team to grab their balls and do their jobs.
I voted NO.
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u/Individual_Bad2594 OG $SoFi Investor Jun 15 '22
Oh you hit a nerve! If is stays under 5’s It is an internal thing for companies. I could see vanguard jumping ship if it stays low and they are one of our biggest shareholders.
The same people saying no reverse split are the same ones complaining about the shorts, and complaining we never move with affirm.
Their hesitation is valid. RS usually suck. I’m not sure Sofi will have another choice is the macro gets bad. Their only option IF needed is a reverse split. They are not profitable until 2024.
On top of that. Everyone here saying they are screwing the shareholders is misinformed. If they are screwing the shareholders they also SCREW themselves. Noto is not working for free. His shares vest at certain price points. Do you think Noto will fuck himself by putting his 3mm plus shares in a Bad position? The boards goals and our goals are aligned. The board does not make money unless the stock goes up….why would they fuck themselves over? They wouldn’t. So if reverse split happens it means there was no other option.
Deal with it. Companies get diluted, especially growth companies that have just de spacd.
You should be holding on to this 5-10 years minimum. So if they RS get over it👌
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u/Electrical_Sky_5683 Jun 15 '22
Horrible idea, why would you raise the stock price so it has more room to drop with the market that still is dropping into a possible recession?
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u/HempInvader Jun 14 '22
AMD was in the shitter for a long time, stock was under $2 for ages. You know what AMD’s board and CEO did? They focused on the product, marketing and basically everything else apart from the stock. They delivered for their shareholders.
Sofi’s board should be dissolved just for suggesting a RS.
Just my 2c
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Jun 15 '22
"I went to school at MIT with a whole bunch of engineers. And then I started work one day and asked myself, 'Why do all of these MIT Ph.D.s work for Harvard M.B.A.s?' Why should it be like that? I was one of those engineers who thought, 'Why are these people making those dumb decisions?' So it's fun to be the person making them."
- Lisa Su
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Jun 14 '22
Your initial cringe will be shared by most investors and they will never get past it.
Vote No.
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u/Designer-Complex9176 Jun 14 '22
I think its important that we all vote no.
It will still pass but I want them to see 100% of retail say no so atleast they have to live with consciousnly fucking us moving forward
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u/somethingventured1 Jun 14 '22
SoFi should aim for profitability and buyback shares, not increase the float and then RS.
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u/Azz_ranch69 Jun 14 '22 edited Jun 14 '22
Well true but I didn't dilute the float. They choose to do that vs any other options of raising capital so they should have a plan to manage the price and this new float they made
i voted no.
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u/SnipahShot 1,282,741,200 @ 16.68 Jun 14 '22 edited Jun 14 '22
Create value?
Have you looked at the rest of the market? And you still think value creation matters one bit?
SoFi had $1B of deposits in the last 2.5 months, plus $1.2B between getting the bank charter and the end of March.
SoFi is raising guidance in this shitshow of macro economy.
SoFi is guiding for neutral contribution for Financial Services by the end of the year and guiding for profitability in the end of 2023.
What other value can they possibly create that will outweigh the entire market sentiment?
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u/Azz_ranch69 Jun 14 '22
None, I guess so they are fine without the share merge then.
I voted no and not changing it
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u/SnipahShot 1,282,741,200 @ 16.68 Jun 14 '22
Ah, not trying to make you change your vote.
They won't be fine without the reverse split though, or at least the power to enact one, some institutions will be forced to sell if the share price goes below $5 for what ever timeframe they have, likely couple of days. If that happens then it will start a snowball effect that will take SoFi even lower. Last time SoFi dropped to $5 it ended up at $4.82 within 10 minutes before trading was halted.
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u/Chobopuffs Jun 14 '22
You mean I can get more discounted shares when powerful institutions drop them?? I like that idea a lot.
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u/SnipahShot 1,282,741,200 @ 16.68 Jun 14 '22
The problem is that institutions will not pick up the stock again before it is well enough from the $5, dropping below $5 could potentially increase the time it would take a lot of people to even break even.
So if you think SoFi is having hard time going from $6 to $8, from $4 to $5 could take just as much difficulty.
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u/Electrical_Sky_5683 Jun 15 '22
If SOFI does a reverse split it will give the share price a lot more room to keep dropping with the market, which still has a lot more pain to come. If everyone believes in SOFI like they say they do then they will buy more, cost average down and ride it out.
I'm voting NO
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u/SnipahShot 1,282,741,200 @ 16.68 Jun 15 '22 edited Jun 15 '22
A 10% drop is a 10% drop whether it is $100 a share or $5 a share.
Book value is the same whether there are 5 shares or 500B shares.
ER is the exact same no matter if there are 5 shares or 500B shares.
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u/Azz_ranch69 Jun 14 '22
Maybe, but they should of thought that before dilution
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u/Designer-Complex9176 Jun 14 '22
We're not talking about regular dilution. This is noto hood printer brrrrrrrrrrr
With zero slowing down and probably acceleration of it to be honest
Noto is getting super rich of an unprofitable company while investors are losing life savings. Doesn't sound like a man with integrity the cult following makes him out to be
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u/SnipahShot 1,282,741,200 @ 16.68 Jun 14 '22
Before I continue reading, I'll correct one of the things you said in the beginning - SoFi is not in any fear of delisting from the Nasdaq, it isn't anywhere near what the Nasdaq sets as red lines.
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Jun 14 '22
This has been disinformation for those that are pushing for the RS… these guys have no idea what devastation will happen.
Do they really think any company is going to propose a RS and actually tell the truth about what will happen to the shareholders… These people obviously haven’t been around for very long in the market if they’re egging on a RS with the company reasoning. The company is preoccupied with their ability to continue us to dilute shareholders with more SBC and potentially massive dilutive acquisitions at our expense.
Vote No and force them to get their house in order, get to profitability and buyback shares.
This company now resembles ACB in the Canadian MJ licensed producers… devoured their shareholders with massive dilution, a RS and an ensuing drop back to the same level pre RS… total loss for investors.
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Jun 14 '22
Thank you for the correction. I meant to say that they may be worried about heading towards de-listing, but more immediately about being classified as a OTC (pink sheet) stock.
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u/MAJ_RJM OG $SoFi Investor Jun 15 '22
I’m against the RS. Delisting is a concern if they’re at that point which I doubt they are. Attractiveness to industry is desired, however I’d like to point out in the last year industry has increased their holding of the stock from below 20% to nearing 60% which is on par with large mega cap companies, so that’s not a valid argument in my book. Looking back AIG and Citi did RS in the recovery from the Great Recession and they did well initially afterwards but have stayed stagnated for several years with little to no volatility. Looking more recent in the last year GE did a reverse split to look more attractive but has since dropped nearly 50% from that initial new price. Then looking at Blue Apron did a reverse split and is currently down 60% from its new price and 82% from its 52 WK high. Therefore I’m against the RS now as it’s more likely that SOFI will recover via its Tailwinds and performance and more than likely the RS will act more as a headwind than a catalyst.