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SoFi ain’t So Fine after announcing acquisition

Shares of digital personal finance company SoFi Technologies (NASDAQ: SOFI) slipped after the company announced it was acquiring core processing company Technisys for $1.1 billion.

More on SoFi

SoFi (short for social finance) provides online financial products such as student loan refinancing, mortgages, credit card, investing, & banking.

More on Technisys

Technisys helps established banks roll out digital products, as well as offers data analysis in real time.

Sounds like a good match, why the slip?

It is a good match, but then again, $1.1 billion is a lot of money.

The deal is also an all-stock transaction, which means that shareholders of the target company (Technisys) receive shares in the acquiring company (SoFi) as payment, rather than cash.

It also means that existing SoFi shareholders will end up with a smaller percentage of SoFi’s stock than before the acquisition.

Generally speaking, an acquiring company’s stock price could fall down for potential rising costs to integrate the target company. 

Why this matters

SoFi wants to become a “one-stop-shop” for banking services, as it already owns payments platform Galileo.

The acquisition is expected to generate SoFi between $500 to $800 million in revenues through 2025.