SoFi stock falls following analyst downgrade on possible headwinds

The Yahoo Finance Live team discusses the drop in SoFi Technologies shares after its downgrade from Wedbush Securities.

Video transcript

- We're also watching shares of SoFi today. This has been interesting to track this morning. It's down 9%. This is after Wedbush downgraded the stock from neutral to underperform, slashed their price target from $5 to $2.50, saying SoFi's fair value accounting may present headwinds here.

They also noted that there were no loan sales in 1 Q, the first quarter, raising questions, given that SoFi designates its loans as held for sale. And then they also mentioned that an equity capital raise is apparently being contemplated here that would lead to a dilution of the share value as well.

- Yeah, this is a really interesting look at-- and wonky look, let's be honest, at SoFi's accounting. But if you are lending out money, and then you sell that loan book, you get a value in the market. It's valued in the market. You know how much it's worth.

If you're not selling that loan book, then you're just guessing internally at what that loan book is worth. And that is what this note is kind of focusing on. And interesting here, the analyst behind this, I want to mention, who's doing this underperform, a downgrade, is David Chiaverini, who we spoke to about regional banks.

So he's been tracking the whole regional bank crisis really closely. And it's interesting that he's now turning his attention to SoFi. To be frank, I didn't even know he covered SoFi, right? Because it's usually covered under people who look at fintech. So it's interesting that he's the regional bank guy, and he is looking at this issue of how these loan books are valued. It reminds me, I have to say, of the so-called held to maturity.

- Yep

- Right? Or, hopefully, held to maturity-- unrealized losses. So in other words, we're still talking about the idea of unrealized losses or unrealized valuation. How do you value something internally? So this is kind of a-- I'm not drawing direct parallels, but I'm just-- my brain is just thinking along those lines.

- Maybe it falls under Chiaverini's coverage because they did receive regulatory approval to operate as a bank as well.

- Yes. It must, yes.

- Perhaps, therein, and a fresh face for David to be watching right now in comparison to the rest of the regional banks.

- Unluckily for SoFi today.

- There you go, yeah.