Short Selling

Why SoFi Technologies Inc is still in the Short Selling phase?

Previously covered by 2iQ analysts for a recent insider purchase, SoFi Technologies Inc (SOFI: US) is a fintech giant based in San Francisco, California. The company operates in both technology and financial services, providing a range of services including loans, cash management & investments, and brokerage services.

The aforementioned blog also covered the short-selling that SOFI was subjected to at the time. However, it seems that red flags on the finance stock has not yet subsided.

Shor Selling & Price Drop

SOFI stock closed at $6.29 on April 26. In the past month, the stock has fallen by nearly 30.1%. The shares began the year at a closing price of $15.68.

Since the start of the year, specifically, January 24, SOFI’s utilization rate has been rising significantly. From February 22 to the present day, the utilization rate is 100%. When 2022 commenced, SOFI had around 68.5 million shares on loan. Unfortunately, since then the number has surged at an eye-popping rate. As of the moment, the total shares on loan are almost 228.8 million.

Different short selling measures are depicted in this diagram, which gives shorting statistics.

Bearish Tidings

SoFi technologies opened the year with aplomb. On January 18, the company received the much-awaited nod from the Federal Reserve and the OCC to become an official bank holding company. SoFi’s CEO, Anthony Noto, said of the milestone, “This important step allows us to add to our broad suite of financial products and services to better be there for our members during the major financial moments in their lives and all of the moments in between.”

Later, on March 03, SoFi announced the completed acquisition of Technisys, a multi-product-focused banking platform. The company’s insiders, including Noto himself, purchased SOFI around this time. However, the stock was about to face a major turnaround in the coming month. 

A statement in early April stated that US President Joe Biden has increased the halt on repayment of student loans, at least until August 31, 2022. While this news may have come as a breather for hoards of loan holders, it amounted to more alert signs for SoFi, which earns a large number of profit from its student loan programs. The announcement came as a blow to the stock, even causing the company to cut down on its projected revenues for the ongoing year. Initially, the company listed its adjusted revenue to be at $1.57 billion for 2022, but has slashed it down to $1.47 billion this year. 

The financial company first went public as part of an SPAC agreement with Social Capital Hedosophia Holdings Corp. Since its IPO, the stock rose by nearly 28.52% in a single year, and there is hope that things could still turn around for the stock. The question that remains is how long this bearish tide will last?

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