Social Capital Hedosophia Holdings V (IPOE) is a very promising start-up expected to grow at a rapid pace in the coming years as it expands its banking services and has made a couple of transformational acquisitions to help it execute its strategy. With the fall of tech stocks in recent weeks, IPOE is down 30% from all-time highs as of this writing, I'm ready to grab a bag of it.
Internet banking is a granulated industry, and it's common for most US households to have multiple accounts. Besides cashing in on the general migration to all things digital, IPOE aims to consolidate this by providing multiple services.
IPOE got started offering debt consolidation loans, but the company has used its base to launch itself into other banking needs. The pace at which it has rolled out these new services is impressive. In just the last couple of years, IPOE has made a foray into money and debt tracking, investing, home loans and overdrafts. It is anticipating being able to add plenty of new members to its existing 1.8 million, and thinks it will reach 3 million in 2021.
The company thinks revenue will expand from about $621 million in 2020 to $980 million in 2021. It also projects reaching $3.7 billion in revenue by 2025, although this is really long-term, and a lot could change between then and now.
IPOE has made a couple of acquisitions to bolster its positioning as a full-service bank and financial services organization. It acquired Galileo (a digital payment automation platform, plus one-sixth ownership stake in investment services firm Apex Clearing) last year, and more recently announced it was acquiring tiny Sacramento, California. It will be infused with about $2.4 billion in cash from the SPAC merger, and it will be allocating $750 million of that cash to Golden Pacific to ramp up the national rollout of its banking App.
All three of the firms previously taken public by Palihapitiya aren't just tech outfits. They're using tech to disrupt the status quo of travel, real estate, and insurance and healthcare. There are lots of well-entrenched banks (thousands of them in the U.S. alone) that will try to make their own digital transformation to stave off IPOE.
I think digital-based banking will have a greater share of the market than today, and a younger generation of customers will demand more services be delivered via an app. With its plan to deliver more services digitally all from one place, IPOE's positioning looks excellent.