SoFi (SOFI) – CEO Interview – March 23, 2024
CEO Anthony Noto was interviewed on Cramer’s Mad Money this past week. I usually don’t pay much attention to these, but the convertible notes offering was the topic. Considering all of the confusion surrounding the deals, Noto offered needed information that I will briefly cover.
Overall, the article I published on the matter was entirely accurate… that is aside from one item. My calculations led me to think the overall impact on tangible book value (TBV) per share would be neutral. Well? The deals actually bolster TBV/share by 8%-10%. That TBV accretion is realized by using an equity item to reduce the convertible note liability. Tangible book value is tangible assets – tangible liabilities. The larger the discount on the convertible notes, the larger the TBV boost. That discount had been shrinking for SoFi, so Noto wanted to pounce while he could. I already had a positive view of the news. This update made it even more positive.
Beyond this item, Noto specified that “refinancing other more expensive debt” with the new notes offering means paying off $500 million in 7% interest rate debt. This could boost annual interest expense savings from $40 million to $60 million. As stated in the previous article, interest savings will mean the dilution from the transactions will not lead to material earnings power erosion. It will reduce diluted EPS by less than one penny.
Of note, the offering was not at all done to combat any loan book health deterioration, while Noto reiterated the guidance offered in January. We’re now basically through calendar Q1, meaning the risk of missing quarterly guidance when it reports next month is very, very low.
Beyond this news, Galileo added post-purchase buy now, pay later to turn outstanding card debt into this type of credit vehicle.
