Analyst Says SoFi Accounting Practices May Face Regulatory Scrutiny

SoFi Technologies’ stock dipped Monday (May 15) after an analyst said its accounting may overstate its capital.

Wedbush Managing Director, Equity Research David Chiaverini cut SoFi to underperform and said its accounting practices may come under scrutiny as regulators focus on capital ratios and stress testing after recent bank failures, Bloomberg reported Monday.

“Capital levels may be overstated using fair value accounting and we believe the company may look to raise capital this year to support growth,” Chiaverini wrote in a research note, according to the report.

If SoFi were to use the same accounting method used by its competitor, LendingClub, its tangible book value would be almost 60% lower, the note said, per the report.

SoFi and Wedbush did not immediately reply to PYMNTS’ request for comment.

A SoFi spokesperson told Bloomberg that the company’s “loans are fair value marked every month using current company-specific as well as macro factors and reflect what an expected sale price would be at that point in time.”

Wedbush’s sell rating is the only such rating, with SoFi having nine buy ratings and seven holds, according to the Bloomberg report.

In SoFi’s most recent earnings materials, the company reported that its total membership base rose 46% year over year to 5.7 million and its personal loan originations were also up 46% to nearly $3 billion.

“More than 90% of our consumer deposits are from sticky direct deposit members, and 97% of our deposits are insured,” SoFi CEO Anthony Noto said in the materials.

The company’s financial services products grew by 51% year over year, while student loan originations were down by 47% and home loans slid 71%.

A month earlier, in April, SoFi acquired Wyndham Capital Mortgage to broaden its offerings to prospective homeowners.

“Several macro- and socioeconomic factors — high inflation and rising mortgage rates, the new world of work and others — have ushered in a new era across the U.S. real estate market,” Noto said when announcing the acquisition. “These changing conditions mean it’s more important than ever that borrowers have a trusted partner they can look to as they go through the process of obtaining a mortgage for a home.”