SoFi Stock Under Pressure: Analyst Flags ‘New Questions’ After Short Report Sparks Fresh Accounting Fears

• Keefe Bruyette said the Muddy Waters report “raises some new questions,” though most institutional investors are already aware of the issues.
• Muddy waters alleged major accounting issues, including “Enron-esque” structures and at least $312 million in unrecorded debt, potentially inflating EBITDA.
• SoFi denied the claims and is exploring legal action, while CEO Anthony Noto purchased about $500,000 worth of stock.

Shares of SoFi Technologies, Inc. (SOFI) remained under pressure on Wednesday after an analyst said a short seller report raised “new questions” about the company’s accounting, keeping investor focus on the fallout from fresh allegations.

SOFI stock posted its third consecutive session of losses on Wednesday, sliding 1% to $17.18. Shares slipped slightly further in extended trading. 

Analyst View: ‘New Questions’ Emerge

Keefe, Bruyette & Woods said the Muddy Waters report took a “thorough look” at SoFi Technologies’ accounting, tying together some previously unknown information from uniform commercial code filings and bills of sale with the company’s regular investor disclosures.

The brokerage believes most of the Street is already aware of these issues. It added that this means the stock reaction going forward is likely to be more dependent on retail investors, who are “less aware of the intricacies of SOFI’s accounting/business model.” Keefe said the short report “raises some new questions” and maintained an ‘Underperform’ rating on the stock with a $20 price target, implying a 16% upside to the stock’s current levels. 

Short Seller Allegations Add Pressure

The comments follow a report from Muddy Waters Research , which disclosed a short position and accused SoFi of using “Enron-esque off-balance-sheet structures that disguise borrowings as revenue.”

The firm alleged that SoFi may have a “material misstatement” of at least $312 million in unrecorded debt and raised concerns around loan accounting, charge-off rates, fair value treatment, and its loan-platform business. It said these practices could inflate adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) and may require restatements if proven accurate.

SoFi Rejects Claims, CEO Steps In

SoFi rejected the allegations, saying they reflect “a fundamental lack of understanding” of its financial statements and business. The company said it is evaluating potential legal action over what it called a “factually inaccurate and misleading report.”

The company added that its financials are prepared in accordance with U.S. GAAP and SEC rules and are supported by internal controls. It also noted that it operates as a bank holding company regulated by the Federal Reserve, with its bank regulated by the Office of the Comptroller of the Currency.

Amid the sell-off, CEO Anthony Noto purchased 28,900 shares on Tuesday at an average price of about $17. The roughly $500,000 purchase increased his holdings to about 11.7 million shares.

How Did Stocktwits Users React?

On Stocktwits, retail sentiment for SOFI shifted to ‘bullish’ from ‘extremely bullish’ zone over the past 24 hours amid nearly a 150% surge in message volumes over the past week.

One user said, “I will keep pressing the buy button until earnings if it wants to stay here. Waiting for the $17 "screaming buy" to turn into a $40 "tech platform." THIS being valued as a "low multiple bank" will not last forever.”

Another user said, “This stock overshoots both ways. Will probably see $14 before the run to $75”

SOFI stock has risen 44% over the past year.

For updates and corrections, email newsroom[at]stocktwits[dot]com.

Share

·

Add us on