SoFi CEO Anthony Noto Enters $24.1M Prepaid Stock Deal for 1.5M Shares

SoFi Technologies CEO Anthony Noto has entered into a prepaid variable forward contract for 1.5 million shares, representing 7% of his holdings and less than 1% of the company's total outstanding shares. The deal is worth $24.1 million.

SoFi Technologies, Inc. (NASDAQ:SOFI) announced that its Chief Executive Officer, Anthony Noto, has entered into a prepaid variable forward contract involving 1,500,000 shares of the company’s common stock. The shares represent approximately 7% of Mr. Noto’s beneficial ownership and less than 1% of SoFi’s total outstanding shares [1].

According to the company’s statement, Mr. Noto will receive an upfront cash payment of $24,107,850 as part of the contract with an unaffiliated third-party dealer. The contract is scheduled to mature in approximately three years, on or about August 28, 2028. At maturity, Mr. Noto will have the option to deliver shares or settle the contract in cash, depending on SoFi’s share price at that time [1].

The pledged shares will secure Mr. Noto’s obligations under the contract. He will retain all voting, dividend, and other rights associated with the pledged shares during the contract term. If Mr. Noto chooses to deliver shares at maturity, the quantity will be determined by the company’s share price relative to a floor price of $18.21 per share and a cap price of $49.18 per share. For example, if the share price is $49.18, he could deliver 555,409 shares; if the price is $18.21 or lower, he could deliver 1,500,000 shares. Mr. Noto will not participate in any performance of the pledged shares above the cap or below the floor price unless he opts for cash settlement [1].

The agreement has sparked concern among investors, as it signals a potential sell-off by Noto in the future. However, it is important to note that Mr. Noto has not sold any SoFi common stock since joining in early 2018 and has purchased 2,775,307 shares on the open market over the past four years [1].

SoFi Technologies has been performing well, with strong second-quarter results that surpassed both Needham’s and Wall Street’s expectations for earnings and revenue. The company’s loan platform business achieved an impressive $9.5 billion in annualized origination volume, driving this growth [1]. Despite the recent agreement, the company continues to expand its services and retain customers, with plans to become a one-stop shop for financial services.

In conclusion, while the prepaid stock agreement involving CEO Anthony Noto has caused SoFi Technologies shares to fall, the underlying fundamentals of the company remain strong. Investors should monitor the situation closely and consider the long-term prospects of the company, as well as the potential impact of the agreement on Noto’s decision-making.

References:
[1] https://www.investing.com/news/sec-filings/sofi-ceo-enters-prepaid-variable-forward-contract-on-15-million-shares-93CH-4216190