SoFi Technologies is pushing back hard against a short-seller attack — and the fight isn’t over yet.
Muddy Waters Research published a report on March 17 titled “SOFI: A Financial Engineering Treadmill Leaving Management Fat, Shareholders the Biggest Loser.” The firm alleged that SoFi diluted stock to help management hit bonus targets and incorrectly booked borrowing proceeds as revenue.
SoFi fired back quickly, calling the report “factually inaccurate and misleading” and saying it would consider legal action.
CEO Anthony Noto then put his money where his mouth is. Regulatory filings show he bought around $500,000 of SOFI stock shortly after the report hit.
The stock dipped during each session last week, but the daily declines never topped 1.5%. By Monday, SOFI was up 2.2%.
Much of the debate centers on a $312 million transaction with JPMorgan Chase. Muddy Waters argued this was an unrecorded borrowing — a material misstatement that doesn’t appear on SoFi’s balance sheet.
SoFi was direct in its response. “This is simply wrong,” a person close to the company said. “The $312 million loan with JPMorgan Chase was a loan sale, not a borrowing, as the report falsely claims.”
Mizuho analyst Dan Dolev backed that view. He pointed to SoFi’s Q3 2024 earnings call, where the CFO stated the company sold $312 million of senior secured loans at par. The Q3 10-Q also confirms a secured loan sale at par during that period.
Dolev added that for a regulated bank like SoFi, any such transaction requires a “true sale opinion,” and that the accounting criteria are clearly laid out in SoFi’s 10-K filings under the Variable Interest Entities and Transfers of Financial Assets headers.
Muddy Waters also took aim at SoFi’s personal loan charge-off rate, calculating it at roughly 6.1% versus the 2.89% SoFi reports. The firm argued SoFi manipulates the figure by disposing of loans just before the charge-off threshold.
Dolev disagreed. He pointed to management’s own disclosure of a 4.4% rate when excluding $90 million in late-stage delinquent personal loans. Using a Fitch cumulative gross loss calculation, he arrived at roughly 4.2% — closer to management’s figures than Muddy Waters’.
On student loan discount rates, Muddy Waters argued SoFi used a rate below the 10-year Treasury yield. Dolev countered that because SoFi’s student loans have a weighted-average life of around four years, the four-year SOFR rate is the appropriate benchmark — not the 10-year Treasury.
Muddy Waters doubled down over the weekend, claiming SoFi’s investor relations team ignored four follow-up emails about accounting questions after an initial call on February 6. A fifth outreach prompted a reply from SoFi’s general counsel, who asked Muddy Waters to verify its identity but did not answer the questions.
“SOFI’s silence in response to our questions and report, in our view, affirms our conclusions,” Muddy Waters wrote.
Mizuho’s Dolev maintained his Outperform rating and $38 price target on SoFi following the back-and-forth.
Mizuho analyst Dan Dolev noted that several of the issues flagged by Muddy Waters were already known to the market before the report was published.
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