CEO hiatus stalls SoFi’s banking ambitions
SAN FRANCISCO: Under the leadership of chief executive Mike Cagney, Social Finance Inc (SoFi) set its sights on becoming a one-stop shop for every well-to-do millennial looking for financial services and a romantic partner.
One of the most valuable private financial technology startups in the United States, SoFi’s US$4.3bil valuation was based on expectations it could develop into a major lender but Cagney’s departure this month and the circumstances around his exit complicate efforts to create a new-generation bank that could compete against JPMorgan or Bank of America.
“This will be a headwind for them for some time,” said Robert Wildhack, an analyst for financial technology and marketplace lending firms at Autonomous Research.
“It is hard to see how management turnover wouldn’t delay the growth and penetration of products.” Cagney stepped after a lawsuit alleged he presided over a hostile work environment for women that enabled senior exec- utives to harass female employees. Cagney did not respond to a Reuters request for comment. In a blog post to SoFi employees before he resigned, Cagney said the allegations were “being thoroughly investigated by outside attorneys we have engaged.”
The company has hired headhunters over the past few days to help find his replacement, but an appointment is not expected to take place until the end of the year, a source familiar with the matter told Reuters.
The gap at the top is likely to stall SoFi’s application for a banking license, according to the source, because regulators assess whether a company has a capable CEO before allowing it to accept deposits.
In addition to Cagney, SoFi has to replace other senior executives that have left over the past few months, including former chief financial officer Nino Fanlo, ex-chief revenue officer Michael Tannenbaum and former chief technology officer June Ou.
The CEO search is the company’s first prior- ity, according to a spokesman.
A banking license was a key part of Cagney’s push to grow SoFi beyond its core business of student loans and unsecured personal loans.
“Longer-term deposits are a key financial product obviously, so their ability or inability to offer that is an opportunity for borrowers to jump to a competitor,” said Wildhack.
Rare for a startup, SoFi is profitable. It earned US$61.6mil in the second quarter of 2017, after adjustments, for depreciation and amortisation, taxes, stock-based compensation and other miscellaneous charge offs and investments.
Cagney, a former bank trader, had been the driving force behind SoFi’s big-time ambitions, pushing it into mortgages, personal loans up to US$100,000, wealth management services and life insurance. He told investors after the second quarter that the company was undertaking aggressive growth.
But without Cagney at the helm, the emphasis is expected to shift.