SoFi (SOFI) Stock Rebounds as CEO Makes Bold Purchase Following Short Seller Attack

Key Takeaways

• On March 17, Muddy Waters released a short report targeting SoFi, claiming revenue misclassification and shareholder dilution tied to executive compensation
• SoFi strongly refuted the allegations, labeling them as “factually inaccurate and misleading” while hinting at potential litigation
• CEO Anthony Noto demonstrated confidence by purchasing approximately $500,000 worth of SOFI shares immediately following the report’s release
• The short seller alleges SoFi’s IR department failed to respond to four consecutive email inquiries regarding accounting practices
• Mizuho’s Dan Dolev reinforced his bullish position with an Outperform rating and $38 target price

SoFi Technologies is mounting an aggressive defense against accusations from a prominent short seller — and the battle shows no signs of slowing down.

SoFi Technologies, Inc., SOFI

On March 17, Muddy Waters Research released a critical report bearing the title “SOFI: A Financial Engineering Treadmill Leaving Management Fat, Shareholders the Biggest Loser.” The short seller accused SoFi of issuing shares to facilitate executive bonus achievement and improperly recording borrowing transactions as revenue.

CEO Anthony Noto demonstrated his conviction through action. SEC disclosures reveal he acquired approximately $500,000 worth of SOFI shares in the immediate aftermath of the report’s publication.

While the stock experienced minor pullbacks throughout the week, no single session saw losses exceeding 1.5%. Come Monday, SOFI shares had rallied 2.2%.

The JPMorgan Transaction at the Heart of the Controversy

The primary point of contention revolves around a $312 million deal involving JPMorgan Chase. Muddy Waters characterized this as an undisclosed debt obligation — representing a significant accounting error absent from SoFi’s financial statements.

Mizuho’s Dan Dolev supported SoFi’s position. He referenced SoFi’s third-quarter 2024 earnings call, during which the CFO explicitly disclosed the sale of $312 million in senior secured loans at par value. The Q3 10-Q filing corroborates this secured loan sale at par for that reporting period.

Dolev emphasized that as a regulated banking entity, SoFi must obtain a “true sale opinion” for such transactions, noting that the relevant accounting standards are thoroughly documented in SoFi’s 10-K reports under Variable Interest Entities and Transfers of Financial Assets sections.

Challenging the Charge-Off Calculations and Discount Methodologies

Muddy Waters additionally questioned SoFi’s personal loan charge-off metrics, estimating the actual rate at approximately 6.1% compared to SoFi’s reported 2.89%. The short seller suggested SoFi artificially suppresses this figure through strategic loan disposal timing.

Dolev challenged this interpretation. He highlighted management’s separate disclosure of a 4.4% rate after adjusting for $90 million in late-stage delinquent personal loans. Applying Fitch’s cumulative gross loss methodology, his analysis yielded approximately 4.2% — substantially aligned with management’s disclosure rather than Muddy Waters’ estimate.

Regarding student loan discount rates, Muddy Waters criticized SoFi for employing a rate beneath the 10-year Treasury benchmark. Dolev refuted this by noting that given SoFi’s student loan portfolio maintains a weighted-average maturity of roughly four years, the four-year SOFR represents the proper comparison — not the 10-year Treasury rate.

Muddy Waters escalated over the weekend, asserting that SoFi’s investor relations department disregarded four subsequent email communications containing accounting inquiries following an initial February 6 phone conversation. A fifth attempt generated a response from SoFi’s general counsel requesting identity verification but providing no substantive answers.

Following this exchange, Mizuho’s Dolev reaffirmed his Outperform rating alongside a $38 price objective for SoFi shares.

Mizuho analyst Dan Dolev observed that multiple concerns raised by Muddy Waters had already been publicly disclosed and known to market participants prior to the report’s publication.

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