Shares of SoFi Technologies, Inc. traded lower in Tuesday morning's session, shedding approximately 50.5 cents to hover near $16.65. The decline persisted despite a public rebuttal from a Wall Street analyst, indicating investor concern over a recent short-seller report remains elevated.
Short-Seller Allegations Weigh on Sentiment
The pressure stems from a report issued by Muddy Waters Research on March 17, which alleged the online financial services company was carrying at least $312 million in debt that was not properly reported. SoFi responded forcefully the same day, calling the claims "factually inaccurate and misleading" and suggesting the short-seller demonstrated a "fundamental lack of understanding" of its financials. The company also stated it was considering legal options.
Analyst Defense Cites Public Disclosures
Mizuho analyst Dan Dolev came to the company's defense in a note published Tuesday. He argued that the core claims from Muddy Waters "could likely be refuted using SoFi’s public disclosures." Specifically, Dolev pointed out that the $312 million transaction with JPMorgan was disclosed as a sale of senior secured loans, not concealed borrowing. Regarding the methodology for student loan valuations, he noted the loans have an average life of about four years, making shorter-term funding costs a more relevant benchmark than what the short-seller used.
The controversy has put a spotlight on SoFi's accounting practices for asset sales and how it provisions for credit losses. This comes just after the company reported strong fourth-quarter 2025 results, including net revenue of $1.0 billion and net income of $174 million, with its membership base reaching 13.7 million.
CEO Makes Notable Purchase
In a significant move, SoFi Chief Executive Anthony Noto purchased 28,900 shares on March 17, according to a filing with the Securities and Exchange Commission. The purchase was executed at a weighted average price of $17.3189 per share, increasing his direct stake to roughly 11.7 million shares. Notably, this insider buying occurred on the exact day Muddy Waters publicly revealed its short position.
Wider Fintech Sector Under Pressure
The selling was not isolated to SoFi. The broader consumer finance and fintech sector faced headwinds Tuesday, with shares of Affirm Holdings, Inc., Upstart Holdings, Inc., and LendingClub Corporation all moving lower. However, SoFi contended with a distinct, company-specific controversy that set it apart from the general sector weakness.
A key point of contention in the Muddy Waters report is the company's loan charge-off rate—the percentage of loans lenders write off as uncollectible. The short-seller estimates SoFi's personal-loan charge-off rate at approximately 6.1%. In contrast, Dolev and company disclosures point to a figure closer to 4.4%, citing management commentary.
Stock Stuck Near Lows
Until the debate over accounting and credit quality is resolved in a more definitive manner, the stock may struggle to recover. In Tuesday trading, SoFi shares were changing hands around $16.65, barely above the $16.48 low touched immediately after the short report was released. The lingering uncertainty appears to be maintaining a firm grip on shareholder sentiment, preventing a rebound even with analyst support and insider buying.
The situation underscores the market's sensitivity to allegations concerning financial transparency, especially for growth-oriented fintech companies. Investors will be watching closely for further clarifications from SoFi's management or potential developments regarding the threatened legal action.
