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SoFi’s full-service ambitions are undergoing an important test with the IPO of Instacart

(Bloomberg) — SoFi Technologies Inc.’s Efforts to move from an upstart fintech company to the big leagues of financial institutions may take a major step as soon as next week when the company helps Instacart Inc. to be brought to the stock exchange.

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SoFi is one of 20 banks underwriting the initial public offering, which the filing Monday showed could raise as much as $616 million. The move marks SoFi’s first foray into a company that promises high fees and a good reputation.

The San Francisco-based company has long been known as an online lender for students and those looking for personal loans, and has helped launch five blank-check companies in recent years. But it has yet to enter a traditional IPO market that has been virtually inactive for the past 18 months.

The company has been open about its plans to become a top 10 financial institution in the U.S., and Chief Executive Officer Anthony Noto highlighted its role in Instacart’s listing as part of its goals during a Goldman Sachs Group Inc. conference. last week.

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The acceptance marks an important step for SoFi in its “broader ambition to be a full-service financial company and not just an online student and personal loan provider,” according to Morningstar analyst Michael Miller. Instacart will mark its “first real success,” he said.

Instacart’s listing could value the grocery delivery industry at as much as $9.3 billion. The company plans to sell 14.1 million new shares at a price of $26 to $28 each, the filing said Monday. The company is now working with its bankers to attract investors, and is considering pricing the listing on September 19.

Read more: SoFi CEO wants to turn former anti-bank into financial titan

SoFi’s position could give Instacart more access to the type of retail investors that fueled 2021’s meme stock mania and pushed shares of money-losing electric vehicle startups to nose-bleed valuations.

“SoFi’s role highlights the growing importance of millennials who are attractive customers for both companies,” said Roth MKM analyst Rohit Kulkarni.

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A SoFi representative did not respond to requests for comment.

Beyond loans

SoFi expects to turn a profit for the first time by the end of the year as it expands beyond student loans and its offerings. The company expanded into mortgages and other parts of the financial services market before going public in 2021 by merging with a special purpose acquisition company.

Instacart is part of a trio of high-profile listings expected to go public in the coming weeks, along with semiconductor designer Arm Holdings Ltd. and marketing and data automation provider Klaviyo. For the banks working on Arm’s $5 billion-plus IPO, fees could reach $100 million, demonstrating the high returns the insurance business can offer.

The success of these debuts will also be a crucial test for Wall Street banks, which have not had to pay IPO fees for almost two years because that market was in the doldrums.

However, SoFi will face stiff competition as it tries to build on its Instacart work and take more action as fundraising in the public markets increases. That’s partly because the company doesn’t have the size and experience of other potential insurers, Morningstar’s Miller says.

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The online bank will play a subordinate role next to the main underwriters on the Instacart listing – Goldman Sachs and JPMorgan Chase & Co. – and is expected to serve its private customers.

“Working with SoFi gives them broader exposure to retailers than if they had simply used another traditional insurer, but it’s hard to say whether that led to this decision,” Miller said. “It could just be a matter of what SoFi offered to be part of the deal.”

–With help from Paige Smith.

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